As filed with the Securities and Exchange Commission on June 24, 2014
Securities Act File No. 333-180973
Investment Company Act File No. 811-05410
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
(Check Appropriate box or boxes)
Registration Statement Under The Securities Act Of 1933 |
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Pre-Effective Amendment No. |
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Post-Effective Amendment No. 4 |
x |
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and/or |
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Registration Statement Under The Investment Company Act Of 1940 |
x |
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Amendment No. 99
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x |
VOYA PRIME RATE TRUST
(Exact Name of Registrant Specified in Charter)
7337 E. Doubletree Ranch Road
Scottsdale, AZ 85258
(Address of Principal Executive Offices)
Registrants Telephone Number, Including Area Code: (800) 992-0180
Huey P. Falgout, Jr. Voya Investments, LLC 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, AZ 85258 (Name and Address of Agent for Service) |
With copies to: Jeffrey S. Puretz, Esq. Dechert LLP 1900 K Street, NW Washington, DC 20006 |
Approximate Date of Proposed Offering:
As soon as practical after the effective date of this Registration Statement.
If any securities being registered on this form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box. x
It is proposed that this filing will become effective:
x When declared effective pursuant to Section 8(c) of the Securities Act of 1933.
VOYA PRIME RATE TRUST
(Registrant)
5,000,000 Common Shares
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement consists of the following papers and documents:
* Cover Sheet
* Contents of Registration Statement
* Voya Prime Rate Trust 5,000,000 Common Shares Prospectus dated June 30, 2014
* Voya Prime Rate Trust 5,000,000 and 25,000,000 Common Shares Statement of Additional Information dated June 30, 2014
* Part C
* Signature Page
• | Voya Prime Rate Trust |
• | 5,000,000 Common Shares |
• | elect at least two trustees at all times; and |
• | elect a majority of the trustees at any time when dividends on any series of Preferred Shares are unpaid for two full years. |
• | less rigorous regulatory, accounting, and reporting requirements than U.S. borrowers; |
• | differing legal systems and laws relating to creditors' rights; |
• | the potential inability to enforce legal judgments; |
• | economic adversity that would result if the value of the borrower's non-U.S. dollar denominated revenues and assets were to fall because of fluctuations in currency values; and |
• | the potential for political, social, and economic adversity in the foreign borrower's country. |
Shareholder Transaction Expenses: | |
Shareholder Reinvestment Program Fees | None |
Privately Negotiated Transactions: | |
Sales Load (as a percentage of offering price) | 3.00% |
Annual Expenses (as a percentage of average net assets attributable to Common Shares): | |
Management and Administrative Fees 1 | 1.50% |
Interest Expense on Borrowed Funds | 0.50% |
Other Operating Expenses 2 | 0.13% |
Total Annual Expenses | 2.13% |
Fee Waivers/Reimbursements/Recoupment 3 | None |
Net Annual Expenses 4 | 2.13% |
1 | Pursuant to the investment advisory agreement with the Trust, the Adviser is paid a fee of 0.80% of the Trust's Managed Assets. Pursuant to its Administration Agreement with the Trust, the Administrator is paid a fee of 0.25% of the Trust's Managed Assets. See “Investment Management and Other Service Providers - The Administrator.” |
2 | Other Operating Expenses are estimated amounts for the current fiscal year and do not include the expenses of borrowing. |
3 | The Adviser is contractually obligated to limit expenses of the Trust, through July 1, 2015; the obligation does not extend to interest, taxes, brokerage commission, Acquired Fund Fees and Expenses, leverage expenses, other investment-related costs, and extraordinary expenses. The obligation will automatically renew for one-year terms unless: (i) the adviser provides 90 days written notice of its termination and such termination is approved by the Trust’s board; or (ii) the management agreement has been terminated. The obligation is subject to possible recoupment by the adviser within three years. For more information regarding the Trust's expense limitation agreement, please see the SAI. |
4 | If the expenses of the Trust are calculated on the Managed Assets of the Trust (assuming that the Trust has used leverage by borrowing an amount equal to 30% of the Trust's Managed Assets), the Net Annual Expenses for the Trust would be lower than the expenses shown in the table. Such lower Net Annual Expense ratio would be 1.49%. |
1 Year | 3 Years | 5 Years | 10 Years | |||
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return and borrowings by the Trust in an aggregate amount equal to 30% of its Managed Assets. | $ | 51.18 | 96.72 | 146.71 | 292.87 |
Per Share Operating Performance |
Total Investment
Return (1) |
Ratios to average
net assets |
Supplemental
data |
|||||||||||||||||||||||||||||||||||
Net asset value, beginning of
year or period |
Net investment income (loss) | Net realized and unrealized gain (loss) | Distribution to Preferred Shareholders |
Change in net asset value from
Share offerings |
Total from investment operations |
Distributions to Common Shareholders
from net investment income |
Distributions from return of capital | Total distributions | Net asset value, end of year or period |
Closing market price, end of
year or period |
Total Investment Return at
net asset value (2) |
Total Investment Return at closing
market price (3) |
Expenses, net of fee waivers and/or
recoupments, if any (4) |
Expenses (before interest and other fees
related to revolving credit facility) (4) |
Expenses, prior to fee waivers and/or
recoupments, if any (4) |
Net investment income (loss) (4) | Net assets, end of year or period | Portfolio Turnover | ||||||||||||||||||||
Year or period ended | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | (%) | (%) | (%) | (%) | (%) | (%) | ($000's) | % | |||||||||||||||||||
02-28-14 | 6.02 | 0.40 | 0.07 | — | — | 0.47 | (0.40) | (0.01) | (0.41) | 6.08 | 5.87 | 8.15 | (4.04) | 2.15 | 1.65 | 2.15 | 6.47 | 898,254 | 96 | |||||||||||||||||||
02-28-13 | 5.79 | 0.46 | 0.19 | — | — | 0.65 | (0.42) | — | (0.42) | 6.02 | 6.55 | 11.72 | 27.73 | 2.14 | 1.63 | 2.14 | 7.76 | 887,047 | 93 | |||||||||||||||||||
02-29-12 | 6.08 | 0.35 | (0.32) | (0.00) * | — | 0.03 | (0.32) | — | (0.32) | 5.79 | 5.51 | 0.81 | (3.11) | 2.20 | 1.67 | 2.20 | 6.07 | 851,278 | 81 | |||||||||||||||||||
02-28-11 | 5.72 | 0.30 | 0.38 | (0.00) * | — | 0.68 | (0.30) | (0.02) | (0.32) | 6.08 | 6.02 | 12.32 | 7.09 | 1.93 | 1.59 | 1.93 | 4.87 | 893,661 | 60 | |||||||||||||||||||
02-28-10 | 3.81 | 0.28 | 1.95 | (0.00) * | — | 2.23 | (0.32) | — | (0.32) | 5.72 | 5.94 | 60.70 | 81.66 | 1.93 | 1.77 (6) | 1.99 (6) | 5.56 | 830,785 | 38 | |||||||||||||||||||
02-28-09 | 6.11 | 0.46 | (2.29) | (0.06) | — | (1.89) | (0.41) | — | (0.47) | 3.81 | 3.50 | (31.93) (5) | (32.03) (5) | 3.01 | 1.95 | 3.01 | 7.86 | 552,840 | 10 | |||||||||||||||||||
02-29-08 | 7.65 | 0.75 | (1.57) | (0.16) | — | (0.98) | (0.56) | — | (0.72) | 6.11 | 5.64 | (13.28) | (17.25) | 4.36 | 2.20 | 4.36 | 10.35 | 886,976 | 60 | |||||||||||||||||||
02-28-07 | 7.59 | 0.71 | 0.06 | (0.16) | — | 0.61 | (0.55) | — | (0.71) | 7.65 | 7.40 | 8.85 | 13.84 | 4.62 | 2.21 | 4.62 | 9.42 | 1,109,539 | 60 | |||||||||||||||||||
02-28-06 | 7.47 | 0.57 | 0.12 | (0.11) | — | 0.58 | (0.46) | — | (0.57) | 7.59 | 7.02 | 8.53 | (0.82) | 4.27 | 2.33 | 4.27 | 7.71 | 1,100,671 | 81 | |||||||||||||||||||
02-28-05 | 7.34 | 0.45 | 0.16 | (0.05) | — | 0.56 | (0.43) | — | (0.48) | 7.47 | 7.56 | 7.70 | 2.04 | 3.17 | 2.29 | 3.18 | 6.04 | 1,082,748 | 93 |
(1) | Total investment return calculations are attributable to common shares. |
(2) | Total investment return at net asset value has been calculated assuming a purchase at net asset value at the beginning of each period and a sale at net asset value at the end of each period and assumes reinvestment of dividends, capital gain distributions and return of capital distributions/allocations, if any, in accordance with the provisions of the dividend reinvestment plan. |
(3) | Total investment return at market value has been calculated assuming a purchase at market value at the beginning of each period and a sale at market value at the end of each period and assumes reinvestment of dividends, capital gain distributions, and return of capital/allocations, if any, in accordance with the provisions of the dividend reinvestment plan. |
(4) | The Adviser has agreed to limit expenses excluding interest, taxes, brokerage commission, leverage expenses, other investment related costs and extraordinary expenses, subject to possible recoupment by the Adviser within three years to 1.05% of Managed Assets plus 0.15% of average daily net assets. |
(5) | There was no impact on total return due to payments by affiliates. |
(6) | Includes excise tax fully reimbursed by the Investment Adviser. |
* | Amount is more than $(0.005). |
Ratios to average to average net assets
plus borrowings |
Supplemental data | |||||||||||||||||||||
Expenses (before interest and other fees
related to revolving credit facility) |
Expenses, prior to fee waivers and/or
recoupments, if any |
Expenses, net of fee waivers and/or
recoupments, if any |
Net investment income (loss) |
Preferred Shares - Aggregate amount
outstanding |
Liquidation and market value per share
of Preferred Shares |
Asset coverage inclusive of Preferred
Shares and debt per share (a) |
Borrowings at end of period | Asset coverage per $1,000 of debt (a) | Average borrowings |
Common shares outstanding at end of
year or period |
||||||||||||
Year or period ended | (%) | (%) | (%) | (%) | ($000's) | ($) | ($) | ($000's) | ($) | ($000's) | ($000's) | |||||||||||
02-28-14 | 1.15 | 1.50 | 1.50 | 4.51 | — | — | 3 | 407,000 | 3,207 | 387,979 | 147,788 | |||||||||||
02-28-13 | 1.17 | 1.53 | 1.53 | 5.55 | — | — | 3 | 370,600 | 3,394 | 345,145 | 147,427 | |||||||||||
02-29-12 | 1.24 | 1.64 | 1.64 | 4.51 | — | — | 3 | 364,000 | 3,339 | 293,444 | 147,116 | |||||||||||
02-28-11 | 1.39 | 1.68 | 1.68 | 4.26 | 100,000 | 25,000 | 102,850 | 187,000 | 6,314 | 122,641 | 146,954 | |||||||||||
02-28-10 | 1.67 (1) | 1.87 (1) | 1.81 | 5.23 | 200,000 | 25,000 | 98,400 | 83,000 | 13,419 | 46,416 | 145,210 | |||||||||||
02-28-09 | 1.54 | 2.37 | 2.37 | 6.21 | 225,000 | 25,000 | 70,175 | 81,000 | 10,603 | 227,891 | 145,178 | |||||||||||
02-29-08 | 1.60 | 3.17 | 3.17 | 7.53 | 450,000 | 25,000 | 53,125 | 338,000 | 4,956 | 391,475 | 145,094 | |||||||||||
02-28-07 | 1.56 | 3.25 | 3.25 | 6.63 | 450,000 | 25,000 | 62,925 | 281,000 | 6,550 | 459,982 | 145,033 | |||||||||||
02-28-06 | 1.58 | 2.90 | 2.90 | 5.24 | 450,000 | 25,000 | 55,050 | 465,000 | 4,335 | 509,178 | 145,033 | |||||||||||
02-28-05 | 1.63 | 2.27 | 2.26 | 4.32 | 450,000 | 25,000 | 53,600 | 496,000 | 4,090 | 414,889 | 145,033 |
(a) | Asset coverage ratios, for fiscal year periods beginning after 2011, is presented to represent the coverage availability to each $1,000 of borrowings. Asset coverage ratios, for periods prior to fiscal 2009, represented the coverage available for both the borrowings and Preferred Shares expressed in relation to each $1,000 of borrowings and Preferred Shares liquidation value outstanding. The Asset coverage ratio per $1,000 of debt for periods subsequent to fiscal 2008, is presented to represent |
the coverage available to each $1,000 of borrowings before consideration of any Preferred Shares liquidation price, while the Asset coverage inclusive of Preferred Shares, presents the coverage available to both borrowings and Preferred Shares, expressed in relation to the per share liquidation price of the Preferred Shares. | |
(1) | Includes excise tax fully reimbursed by the Investment Adviser. |
Price($) | NAV($) |
Premium/(Discount)
To NAV(%) |
Reported
NYSE Volume |
||||
Calendar Quarter Ended | High | Low | High | Low | High | Low | |
March 31, 2011 | 6.16 | 5.77 | 6.08 | 5.90 | 1.99 | (3.02) | 32,819,000 |
June 30, 2011 | 6.27 | 6.03 | 6.07 | 5.94 | 4.04 | (0.50) | 25,844,000 |
September 30, 2011 | 6.22 | 5.00 | 5.96 | 5.43 | 4.54 | (9.65) | 32,516,300 |
December 30, 2011 | 5.38 | 4.86 | 5.68 | 5.40 | (4.95) | (10.38) | 34,066,600 |
March 30, 2012 | 5.79 | 5.14 | 5.83 | 5.59 | (0.52) | (8.21) | 31,419,500 |
June 30, 2012 | 5.83 | 5.43 | 5.88 | 5.71 | (0.17) | (5.40) | 33,720,800 |
September 30, 2012 | 6.20 | 5.68 | 5.95 | 5.77 | 4.20 | (2.22) | 35,701,000 |
December 31, 2012 | 6.34 | 5.84 | 5.96 | 5.90 | 6.55 | (1.18) | 29,910,900 |
March 31, 2013 | 6.79 | 6.27 | 6.06 | 5.93 | 12.83 | 4.49 | 35,043,000 |
June 30, 2013 | 6.90 | 6.06 | 6.13 | 6.00 | 13.86 | 0.33 | 40,032,700 |
September 30, 2013 | 6.26 | 5.88 | 6.06 | 5.97 | 4.17 | (1.82) | 30,276,700 |
December 31, 2013 | 6.17 | 5.75 | 6.06 | 5.99 | 2.16 | (4.96) | 30,785,500 |
March 31, 2014 | 5.96 | 5.71 | 6.10 | 6.03 | (1.65) | (5.93) | 28,772,900 |
1. | Senior Loans. Under normal market conditions, at least 80% of the Trust's net assets (plus borrowings for investment purposes) will be invested in Senior Loans. This investment policy may be changed without shareholder approval so long as the Trust provides its shareholders with at least 60 days' prior notice of any changes in this investment policy. Under normal market conditions, the Trust invests at least 80% of its assets in Senior Loans made to corporations or other business entities organized under U.S. or Canadian law and that are domiciled in the United States and in U.S. territories and possessions or Canada. |
The Senior Loans in which the Trust invests either hold the most senior position in the capital structure of the borrower, hold an equal ranking with other senior debt, or have characteristics (such as a senior position secured by liens on a borrower's assets) that the Adviser or Sub-Adviser believes justify treatment as senior debt. These Senior Loans are typically below investment-grade credit quality. Investments rated below investment-grade (or of similar quality if unrated) are commonly known as high-yielding, high risk investments or as “junk” investments. | |
The Trust typically makes its investments in Senior Loans by purchasing a portion of the overall loan, i.e., the Trust becomes one of a number of lenders investing in the loan. The Trust may also make its investments in Senior Loans through the use of derivative instruments such as participations, credit-linked notes, credit default swaps, and total return swaps as long as the reference obligation for any such instrument is a Senior Loan. Investments through the use of such derivative instruments involve counterparty risk, i.e., the risk that the party from which such instrument is purchased will not perform as agreed. The Trust seeks to minimize such counterparty risk by purchasing such investments only from large, well established and highly rated counterparties. | |
2. | Other Investments. Under normal market conditions, the Trust may invest up to 20% of its total assets, measured at the time of investment, in a combination of one or more of the following types of investments (“Other Investments”): |
• | loans to borrowers organized or located in countries outside the United States and outside U.S. territories and possessions or Canada; |
• | unsecured floating rate loans, notes, and other debt instruments; |
• | floating rate subordinated loans; |
• | tranches of floating rate asset-backed securities, including structured notes; |
• | short-term debt securities; and |
• | equity securities incidental to investments in loans. |
3. | Cash and Short-Term Instruments. Under normal market conditions, the Trust may invest in cash and/or short-term instruments. During periods when, in the opinion of the Adviser or Sub-Adviser, a temporary defensive posture in the market is appropriate, the Trust may hold up to 100% of its assets in cash and/or short-term instruments. |
4. | Other Investment Strategies. The Trust may lend its portfolio securities, on a short-term or long-term basis, in an amount equal to up to 33 1 ⁄ 3 % of its total assets. |
1. | Industry Concentration. The Trust may invest in any industry. The Trust may not invest more than 25% of its total assets, measured at the time of investment, in any single industry. |
2. | Borrower Diversification. The Trust is diversified, as such term is defined in the 1940 Act. A diversified fund may not, as to 75% of its total assets, invest more than 5% of its total assets in any one issuer and may not purchase more than 10% of the outstanding voting securities of any one issuer (other than securities issues or guaranteed by the U. S. government or any of its agencies or instrumentalities, or other investment companies). The Trust will consider the borrower on a loan, including a loan participation, to be the issuer of such loan. With respect to no more than 25% of its total assets, the Trust may make investments that are not subject to the foregoing restrictions. |
1. | Limitations on currencies. The Trust's investments must be denominated in U.S. dollars, provided that the Trust may invest up to 15% of its total assets in investments denominated in the OECD currencies (including the euro), other than the U.S. dollar. The Trust will engage in currency exchange transactions to seek to hedge, as closely as practicable, 100% of the economic impact to the Trust arising from foreign currency fluctuations. |
2. | Maturity. Although the Trust has no restrictions on portfolio maturity, under normal market conditions, at least 80% of the Trust's total assets will be invested in assets with remaining maturities of one to ten years. The maximum maturity on any loan in which the Trust can invest is ten years. |
3. | Limitations on Other Investments. The Trust may also invest up to 20% of its total assets, measured at the time of investment, in Other Investments. The following additional limitations apply to Other Investments: |
• | Unsecured Debt Instruments. The Trust may not invest in unsecured floating rate loans, notes, and other debt instruments, in an aggregate amount that exceeds 20% of the Trust's total assets, measured at the time of investment. |
• | Equities. The Trust may acquire equity securities only as an incident to the purchase or ownership of a loan or in connection with a reorganization of a borrower or its debt. |
• | Subordinated Loans. The Trust may not invest in floating rate subordinated loans, whether or not secured, in an aggregated amount that exceeds 5% of its total assets, measured at the time of investment. |
4. | Investment Quality; Credit Analysis. Loans in which the Trust invests generally are rated below investment-grade credit quality or are unrated. In acquiring a loan, the Adviser or Sub-Adviser will consider some or all of the following factors concerning the borrower: ability to service debt from internally generated funds; adequacy of liquidity and working capital; appropriateness of capital structure; leverage consistent with industry norms; historical experience of achieving business and financial projections; the quality and experience of management; and adequacy of collateral coverage. The Adviser or Sub-Adviser performs its own independent credit analysis of each borrower. In so doing, the Adviser or Sub-Adviser may utilize information and credit analyses from agents that originate or administer loans, other lenders investing in a loan, and other sources. The Adviser or Sub-Adviser also may communicate directly with management of the borrowers. These analyses continue on a periodic basis for any Senior Loan held by the Trust. See “Risk Factors and Special Considerations - Credit Risk on Senior Loans.” |
5. | Use of Leverage. The Trust may borrow money and issue Preferred Shares to the fullest extent permitted by the 1940 Act. See “Investment Objective and Policies - Policy on Borrowing” and “Investment Objective and Policies - Policy on Issuance of Preferred Shares.” |
6. | Short-term Instruments. Short-term instruments in which the Trust invests may include: (i) commercial paper rated A-1 by Standard and Poor's Ratings Services (“S&P”) or P-1 by Moody's Investors Service, Inc. (“Moody's”), or of comparable quality as determined by the Adviser or Sub-Adviser; (ii) certificates of deposit, bankers' acceptances, and other bank deposits and obligations; and (iii) securities issued or guaranteed by the U.S. government, its agencies, or instrumentalities. |
1 | Pursuant to the investment advisory agreement with the Trust, the Adviser is paid a fee of 0.80% of the Trust's Managed Assets. Pursuant to its administration agreement with the Trust, the Administrator is paid a fee of 0.25% of the Trust's Managed Assets. See “Investment Management and Other Service Providers - The Administrator.” |
2 | Other Operating Expenses are estimated amounts for the current fiscal year and do not include the expenses of borrowing. |
3 | The Adviser is contractually obligated to limit expenses of the Trust, through July 1, 2015; the obligation does not extend to interest, taxes, brokerage commission, Acquired Fund Fees and Expenses, leverage expenses, other investment-related costs, and extraordinary expenses. The obligation will automatically renew for one-year terms unless: (i) the adviser provides 90 days written notice of its termination and such termination is approved by the Trust’s board; or (ii) the management agreement has been terminated. The obligation is subject to possible recoupment by the adviser within three years. For more information regarding the Trust's expense limitation agreement, please see the SAI. |
Assumed Portfolio Return, net of expenses 1 | -10% | -5% | 0% | 5% | 10% |
Corresponding Return to Common Shareholders 2 | -14.78% | -7.64% | -0.50% | 6.65% | 13.79% |
1 | The Assumed Portfolio Return is required by regulation of the SEC and is not a prediction of, and does not represent, the projected or actual performance of the Trust. |
2 | In order to compute the Corresponding Return to Common Shareholders, the Assumed Portfolio Return is multiplied by the total value of the Trust's assets at the beginning of the Trust's fiscal year to obtain an assumed return to the Trust. From this amount, all interest accrued during the year is subtracted to determine the return available to |
shareholders. The return available to shareholders is then divided by the total value of the Trust's net assets attributable to Common Shares as of the beginning of the fiscal year to determine the Corresponding Return to Common Shareholders. |
• | the characteristics of and fundamental analytical data relating to the loan, including the cost, size, current interest rate, period until the next interest rate reset, maturity and base lending rate of the loan, the terms and conditions of the loan and any related agreements, and the position of the loan in the borrower's debt structure; |
• | the nature, adequacy, and value of the collateral, including the Trust's rights, remedies, and interests with respect to the collateral; |
• | the creditworthiness of the borrower and the cash flow coverage of outstanding principal and interest, based on an evaluation of its financial condition, financial statements and information about the borrower's business, cash flows, capital structure, and future prospects; |
• | information relating to the market for the loan, including price quotations for, and trading in, the loan and interests in similar loans and the market environment and investor attitudes toward the loan and interests in similar loans; |
• | the reputation and financial condition of the agent of the loan and any intermediate participants in the loans; |
• | the borrower's management; and |
• | the general economic and market conditions affecting the fair value of the loan. |
Title of Class |
Number
Authorized |
Number Held By
the Trust for its Own Account |
Number
Outstanding |
Common Shares | unlimited | 0 | 146,516,656,694 |
TABLE OF CONTENTS | |
Page | |
Change of Name
|
3 |
Investment Objective
|
3 |
Investment Restrictions
|
3 |
Additional Information About Investments and Investment Techniques
|
5 |
Management of the Trust
|
14 |
Code of Ethics
|
30 |
Proxy Voting Procedures
|
31 |
Control Persons and Principal Holders of Securities
|
31 |
Investment Management and Other Service Providers
|
32 |
Adviser
|
32 |
Sub-Adviser
|
34 |
Administrator
|
38 |
Distributor
|
38 |
Shareholder Reinvestment Program
|
39 |
Portfolio Transactions
|
41 |
Portfolio Turnover Rate
|
44 |
Net Asset Value
|
44 |
Federal Taxation
|
45 |
Advertising and Performance Data
|
50 |
General Information
|
51 |
Custodian
|
51 |
Legal Counsel
|
52 |
Independent Registered Public Accounting Firm
|
52 |
Financial Statements
|
52 |
Appendix A
|
A-1 |
1940 Act File No. | 811-05410 |
PRO-PL1F-5 | (0614-063014) |
STATEMENT OF ADDITIONAL INFORMATION
June 30, 2014
Voya Prime Rate Trust
(formerly, ING Prime Rate Trust)
7337 East Doubletree Ranch Road, Suite 100
Scottsdale, Arizona 85258-2034
(800) 336-3436
Voya Prime Rate Trust (Trust) is a diversified, closed-end management investment company registered under the Investment Company Act of 1940, as amended (1940 Act). The Trusts investment objective is to provide investors with as high a level of current income as is consistent with the preservation of capital. There is no assurance that the Trust will achieve its investment objective. The Trust is managed by Voya Investments, LLC (formerly, ING Investments, LLC) (Voya Investments or Adviser) and sub-advised by Voya Investment Management Co. LLC (formerly, ING Investment Management Co. LLC) (Voya IM or Sub-Adviser).
This Statement of Additional Information (SAI) does not constitute a prospectus, but is incorporated therein by reference and should be read in conjunction with the Prospectuses relating thereto dated June 30, 2014, copies of which may be obtained without charge from the Trust or the Trusts principal underwriter, Voya Investments Distributor, LLC (formerly, ING Investments Distributor, LLC) (Voya Investments Distributor or Distributor) at the address and phone number listed above. This SAI does not include all the information that a prospective investor should consider before purchasing Common Shares in this offering, and investors should obtain and read the Prospectuses prior to purchasing such shares. In addition, the Trusts financial statements and the independent registered public accounting firms report thereon included in the annual shareholder report dated February 28, 2014, are incorporated herein by reference.
The Prospectuses and SAI omit certain information contained in the registration statement filed with the U.S. Securities and Exchange Commission (SEC). The registration statement may be obtained from the SEC upon payment of the fee prescribed, or inspected at the SECs office for no charge. The registration statement is also available on the SECs website (www.sec.gov). Capitalized terms used in this SAI have the same meaning as in the Prospectuses and some additional terms are defined particularly for this SAI.
TABLE OF CONTENTS
CHANGE OF NAME |
3 |
INVESTMENT OBJECTIVE |
3 |
INVESTMENT RESTRICTIONS |
3 |
ADDITIONAL INFORMATION ABOUT INVESTMENTS AND INVESTMENT TECHNIQUES |
5 |
MANAGEMENT OF THE TRUST |
14 |
CODE OF ETHICS |
30 |
PROXY VOTING PROCEDURES |
31 |
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES |
31 |
INVESTMENT MANAGEMENT AND OTHER SERVICE PROVIDERS |
32 |
ADVISER |
32 |
SUB-ADVISER |
34 |
ADMINISTRATOR |
38 |
DISTRIBUTOR |
38 |
SHAREHOLDER REINVESTMENT PROGRAM |
39 |
PORTFOLIO TRANSACTIONS |
41 |
PORTFOLIO TURNOVER RATE |
44 |
NET ASSET VALUE |
44 |
FEDERAL TAXATION |
45 |
ADVERTISING AND PERFORMANCE DATA |
50 |
GENERAL INFORMATION |
51 |
CUSTODIAN |
51 |
LEGAL COUNSEL |
52 |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
52 |
FINANCIAL STATEMENTS |
52 |
APPENDIX A |
A-1 |
CHANGE OF NAME
The Trust changed its name from Pilgrim Prime Rate Trust to Pilgrim America Prime Rate Trust in April 12, 1996, and then changed its name back to Pilgrim Prime Rate Trust on November 16, 1998. Effective March 1, 2002, the Trust changed its name to ING Prime Rate Trust. Effective May 1, 2014, the Trust changed its name to Voya Prime Rate Trust.
INVESTMENT OBJECTIVE
The Trusts investment objective is to provide investors with as high a level of current income as is consistent with the preservation of capital. The Trust seeks to achieve its investment objective by investing, under normal market conditions, at least 80% of its net assets (plus borrowings for investment purposes) in U.S. dollar-denominated floating rate secured senior loans (Senior Loans). Under normal market conditions, the Trust invests at least 80% of its assets in Senior Loans made to corporations or other business entities organized under U.S. or Canadian law and that are domiciled in the United States and in U.S. territories and possessions or Canada.
The Senior Loans in which the Trust invests either hold the most senior position in the capital structure of the borrower, hold an equal ranking with other senior debt, or have characteristics that the Adviser or Sub-Adviser believes justify treatment as senior debt. These Senior Loans are typically below investment-grade credit quality.
The Trust may also invest up to 20% of its total assets, measured at the time of investment, in a combination of one or more of the following types of investments: loans to borrowers organized or located in countries outside the United States and outside U.S. territories and possessions or Canada; unsecured floating rate loans, notes and other debt instruments; floating rate subordinated loans; tranches of floating rate asset-backed securities, including structured notes; short-term debt securities; and equity securities acquired in connection with investment in loans. (See Additional Information About Investments and Investment Techniques later in this SAI.) During periods when, in the opinion of the Trusts Adviser or Sub-Adviser, a temporary defensive posture in the market is appropriate, the Trust may hold up to 100% of its assets in cash and/or in short-term debt instruments.
INVESTMENT RESTRICTIONS
The Trust operates under a number of investment policies and restrictions. Certain investment restrictions of the Trust are designated as fundamental policies and as such may not be changed without the approval of a majority of the Trusts outstanding voting securities. In accordance with the 1940 Act, a majority of the Trusts outstanding securities means the lesser of: (i) 67% or more of the Trusts shares present at a meeting, if the holders of more than 50% of the Trusts shares are present or represented by proxy; or (ii) more than 50% of the Trusts shares. The following investment restrictions have been designated as fundamental policies.
The Trust will not:
1. issue senior securities, except insofar as the Trust may be deemed to have issued a senior security by reason of: (i) entering into certain interest rate hedging transactions; (ii) entering into reverse repurchase agreements; (iii) borrowing money in an amount permitted under the 1940 Act, including the rules, regulations, interpretations thereunder, and any exemptive relief provided by the SEC; or (iv) issuing a class or classes of preferred shares in an amount not exceeding 50%, or such other percentage permitted by law, of the Trusts total assets less all liabilities and indebtedness not represented by senior securities;
2. invest more than 25% of its total assets in any industry;
3. invest in marketable warrants other than those acquired in conjunction with Senior Loans and such warrants will not constitute more than 5% of its assets;
4. make investments in any one issuer other than U.S. government securities if, immediately after such purchase or acquisition, more than 5% of the value of the Trusts total assets would be invested in such issuer, or the Trust would own more than 25% of any outstanding issue, except that up to 25% of the Trusts total assets may be invested without regard to the foregoing restrictions. For the purpose of the foregoing restriction, the Trust will consider the borrower of a Senior Loan to be the issuer of such Senior Loan. In addition, with respect to a Senior Loan under which the Trust does not have privity with the borrower or would not have a direct cause of action against the borrower in the event of the failure of the borrower to pay scheduled principal or interest, the Trust will also separately meet the foregoing requirements and consider each interpositioned bank (a lender from which the Trust acquires a Senior Loan) to be an issuer of the Senior Loan;
5. act as an underwriter of securities, except to the extent that it may be deemed to act as an underwriter in certain cases when disposing of its portfolio investments or acting as an agent or one of a group of co-agents in originating Senior Loans;
6. purchase or sell equity securities (except that the Trust may, incidental to the purchase or ownership of an interest in a Senior Loan, or as part of a borrower reorganization, acquire, sell and exercise warrants and/or acquire or sell other equity securities), real estate, real estate mortgage loans, commodities, commodity futures contracts, or oil or gas exploration or development programs; or sell short, purchase or sell straddles, spreads, or combinations thereof, or write put or call options;
7. make loans of money or property to any person, except that the Trust: (i) may make loans to corporations or other business entities, or enter into leases or other arrangements that have the characteristics of a loan; (ii) may lend portfolio instruments; and (iii) may acquire securities subject to repurchase agreements;
8. purchase shares of other investment companies, except in connection with a merger, consolidation, acquisition or reorganization; or
9. make investments on margin or hypothecate, mortgage, or pledge any of its assets except for the purpose of securing borrowings as described above in connection with the issuance of senior securities and then only in an amount up to 33 1 / 3 % (50% in the case of the issuance of a preferred class of shares), or such other percentage permitted by law, of the value of the Trusts total assets (including, with respect to borrowings, the amount borrowed) less all liabilities other than borrowings (or, in the case of the issuance of senior securities, less all liabilities and indebtedness not represented by senior securities).
With regard to paragraph number 2 above, the Trust will consider the borrower on a loan, including a loan participation, to be the issuer of that loan. In addition, with respect to a loan under which the Trust does not have privity with the borrower or would not have a direct cause of action against the borrower in the event of the failure of the borrower to pay scheduled principal or interest, the Trust will also consider each interpositioned bank (a lender from which the Trust acquires a loan) to be an issuer of the loan.
If a percentage restriction is adhered to at the time of investment, a later increase or decrease in percentage resulting from a change in value of the Trusts investments or amount of total assets will not be considered a violation of any of the foregoing restrictions.
There is no limitation on the percentage of the Trusts total assets that may be invested in instruments which are not readily marketable or subject to restrictions on resale and to the extent the Trust invests in such instruments, the Trusts portfolio should be considered illiquid. The extent to which the Trust invests in such instruments may affect its ability to realize the net asset value (NAV) of the Trust in the event of the voluntary or involuntary liquidation of its assets.
The Trust has also adopted a non-fundamental policy as required by Rule 35d-1 under the 1940 Act to invest, under normal market conditions, at least 80% of its net assets (plus borrowings for investment purposes) in U.S. dollar-denominated floating rate secured Senior Loans. The Trust has also adopted a policy to provide its shareholders with at least 60 days prior notice of any change in such investment policy. If, subsequent to an investment, the 80% requirement is no longer met, the Trusts future investments will be made in a manner that will bring the Trust into compliance with this policy.
ADDITIONAL INFORMATION ABOUT INVESTMENTS AND INVESTMENT TECHNIQUES
Some of the different types of securities in which the Trust may invest, subject to its investment objective, policies, and restrictions, are described in the Prospectuses under Investment Objective and Policies. Additional information concerning certain of the Trusts investments and investment techniques is set forth below.
Derivatives
Generally, derivatives can be characterized as financial instruments whose value is derived, at least in part, from the value of an underlying asset or assets. Types of derivatives include swaps, options, futures contracts, options on futures, and forward contracts. Derivative instruments may be used for a variety of reasons, including enhancing return, hedging certain market risks, or providing a substitute for purchasing or selling particular securities. Derivatives may provide a cheaper, quicker, or more specifically focused way for the Trust to invest than traditional securities would.
Derivatives can be volatile and involve various types and degrees of risk, depending upon the characteristics of the particular derivative and the portfolio as a whole. Derivatives permit the Trust to increase or decrease the level of risk, or change the character of the risk, to which its portfolio is exposed in much the same way as the Trust can increase or decrease the level of risk, or change the character of the risk, of its portfolio by making investments in specific securities.
Derivatives may be purchased on established exchanges or through privately negotiated transactions referred to as over-the-counter derivatives. Exchange-traded derivatives generally are guaranteed by the clearing agency, which is the issuer or counterparty to such derivatives. This guarantee usually is supported by a daily payment system (i.e., margin requirements) operated by the clearing agency in order to reduce overall credit risk. As a result, unless the clearing agency defaults, there is relatively little counterparty credit risk associated with derivatives purchased on an exchange. By contrast, no clearing agency guarantees over-the-counter derivatives. Therefore, each party to an over-the-counter derivative bears the risk that the counterparty will default. Accordingly, the Trust will consider the creditworthiness of counterparties to over-the-counter derivatives in the same manner as they would review the credit quality of a security to be purchased by the Trust. Over-the-counter derivatives are less liquid than exchange-traded derivatives since the other party to the transaction may be the only investor with sufficient understanding of the derivative to be interested in bidding for it.
The Trust has claimed an exclusion from the definition of a Commodity Pool Operator (CPO) under the Commodity Exchange Act and therefore is not subject to registration or regulation as a CPO. In February 2012, the Commodity Futures Trading Commission (CFTC) adopted regulatory changes that impact the Trust by subjecting the Trusts adviser to registration with the CFTC as a CPO of the Trust, unless the Trust is able to comply with certain trading and marketing limitations on its investments in futures, many over-the-counter derivatives and certain other instruments. A related CFTC proposal to harmonize applicable CFTC and SEC regulations could, if adopted, mitigate certain disclosure and operational burdens where CPO registration is required for an adviser. Compliance with these additional CFTC regulatory requirements may increase Trust expenses.
Equity Securities
In connection with its purchase or holding of interests in loans, the Trust may acquire (and subsequently sell) equity securities or exercise warrants that it receives. The Trust will acquire such interests only as an incident to the intended purchase or ownership of loans or in connection with a reorganization of a borrower or its debt. The Trust normally will not hold more than 20% of its total assets in equity securities. Equity securities will not be treated as Senior Loans; therefore, an investment in such securities will not count toward the 80% of the Trusts net assets (plus borrowings for investment purposes) that normally will be invested in Senior Loans. Equity securities are subject to financial and market risks and can be expected to fluctuate in value.
Interest Rates and Portfolio Maturity
Interest rates on loans in which the Trust invests adjust periodically. The interest rates are adjusted based on a base rate plus a premium or spread over the base rate. The base rate usually is London Inter-Bank Offered Rate (LIBOR), the Federal Reserve federal funds rate, the Prime Rate, or other base lending rates used by commercial lenders. LIBOR usually is an average of the interest rates quoted by several designated banks as the rates at which they pay interest to major depositors in the London interbank market on U.S. dollar-denominated deposits. The Adviser and Sub-Adviser believe that changes in short-term LIBOR rates are closely related to changes in the Federal Reserve federal funds rate, although the two are not technically linked. The Prime Rate quoted by a major U.S. bank is generally the interest rate at which that bank is willing to lend U.S. dollars to its most creditworthy borrowers, although it may not be the banks lowest available rate.
Loans in which the Trust invests typically have multiple reset periods at the same time, with each reset period applicable to a designated portion of the loan. The maximum duration of an interest rate reset on any loan in which the Trust can invest is one year. The maximum maturity on any loan in which the Trust can invest is ten years. The Trusts portfolio of loans will ordinarily have a dollar-weighted average time until the next interest rate adjustment of ninety (90) days or less, although the time may exceed 90 days. The Trust may find it possible and appropriate to use interest rate swaps and other investment practices to shorten the effective interest rate adjustment period of loans. If the Trust does so, it will consider the shortened period to be the adjustment period of the loan. As short-term interest rates rise, interest payable to the Trust should increase. As short-term interest rates decline, interest payable to the Trust should decrease. The amount of time that will pass before the Trust experiences the effects of changing short-term interest rates will depend on the dollar-weighted average time until the next interest rate adjustment on the Trusts portfolio of loans.
Loans usually have mandatory and optional prepayment provisions. Because of prepayments, the actual remaining maturity of a loan may be considerably less than its stated maturity. If a loan is prepaid, the Trust will have to reinvest the proceeds in other loans or securities which may have a lower fixed spread over its base rate. In such a case, the amount of interest paid to the Trust would likely decrease.
In the event of a change in the benchmark interest rate on a loan, the rate payable to lenders under the loan will, in turn, reset as the applicable reset period reaches its next scheduled reset date. If the benchmark rate goes up, the Trust as lender would earn interest at a higher rate, but only on and after such reset date. If the benchmark rate goes down, the Trust as lender would earn interest at a lower rate, but only on and after such reset date.
During normal market conditions, changes in market interest rates will affect the Trust in certain ways. The principal effect will be that the yield on the Trusts Common Shares will tend to rise or fall as market interest rates rise and fall. This is because almost all of the assets in which the Trust invests pay interest at rates which float in response to changes in market rates. However, because the interest rates on the Trusts assets reset over time, there will be an imperfect correlation between changes in market rates and changes to rates on the portfolio as a whole. This means that changes to the rate of interest paid on the portfolio as a whole, will tend to lag behind changes in market rates.
Market interest rate changes may also cause the Trusts NAV to experience volatility. This is because the value of a loan asset in the Trust is partially a function of whether it is paying what the market perceives to be a market rate of interest for the particular loan given its individual credit and other characteristics. If market interest rates change, a loans value could be affected to the extent the interest rate paid on that loan does not reset at the same time. As discussed above, the rates of interest paid on the loans in which the Trust invests have a weighted average reset period that typically is less than 90 days. Therefore, the impact of the lag between a change in market interest rates and the change in the overall rate on the portfolio is expected to be minimal.
Finally, to the extent that changes in market rates of interest are reflected, not in a change to a base rate such as LIBOR, but in a change in the spread over the base rate which is payable on loans of the type and quality in which the Trust invests, the Trusts NAV could be adversely affected. Again, this is because the value of a loan asset in the Trust is partially a function of whether it is paying what the market perceives to be a market rate of interest for the particular loan given its individual credit and other characteristics. However, unlike changes in market rates of interest for which there is only a temporary lag before the portfolio reflects those changes, changes in a loans value based on changes in the market spread on loans in the Trusts portfolio may be of longer duration.
Interest Rate Hedging Transactions
The Trust has the ability, pursuant to its investment objective and policies, to engage in certain hedging transactions including interest rate swaps and the purchase or sale of interest rate caps and floors. The Trust may undertake these transactions primarily for the following reasons: to preserve a return on or value of a particular investment or portion of the Trusts portfolio; to protect against decreases in the anticipated rate of return on floating or variable rate financial instruments which the Trust owns or anticipates purchasing at a later date; or for other risk management strategies such as managing the effective dollar-weighted average duration of the Trusts portfolio. Market conditions will determine whether and in what circumstances the Trust would employ any of the hedging techniques described below.
Interest rate swaps involve the exchange by the Trust with another party of their respective commitments to pay or receive interest, e.g. , an exchange of an obligation to make floating rate payments on a specified dollar amount, referred to as the notional principal amount, for an obligation to make fixed-rate payments. For example, the Trust may seek to shorten the effective interest rate re-determination period of a Senior Loan in its portfolio that has an interest rate re-determination period of one year. The Trust could exchange its right to receive fixed income payments for one year from a borrower for the right to receive payments under an obligation that readjusts monthly. In such an event, the Trust would consider the interest rate re-determination period of such Senior Loan to be the shorter period.
The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate floor. The Trust will not enter into swaps, caps, or floors if, on a net basis, the aggregate notional principal amount with respect to such agreements exceeds the net assets of the Trust or to the extent the purchase of swaps, caps, or floors would be inconsistent with the Trusts other investment restrictions.
The Trust will usually enter into interest rate swaps on a net basis, i.e ., where the two parties make net payments with the Trust receiving or paying, as the case may be, only the net amount of the two payments. The net amount of the excess, if any, of the Trusts obligations over its entitlement with respect to each interest rate swap will be accrued and an amount of cash or liquid securities having an aggregate NAV at least equal to the accrued excess will be maintained in a segregated account. If the Trust enters into a swap on other than a net basis, the Trust will maintain in the segregated account the full amount of the Trusts obligations under each such swap. The Trust may enter into swaps, caps and floors with member banks of the Federal Reserve System, members of the New York Stock Exchange (NYSE) or other entities determined by Voya Investments. If a default occurs by the other party to such transaction, the Trust will have contractual remedies pursuant to the agreements related to the transaction
but such remedies may be subject to bankruptcy and insolvency laws which could materially and adversely affect the Trusts rights as a creditor. The Trust will not treat swaps covered in accordance with applicable regulatory guidance as senior securities.
The swap, cap, and floor market has grown substantially in recent years with a large number of banks and financial services firms acting both as principals and as agents utilizing standardized swap documentation. As a result, this market has become relatively liquid. There can be no assurance, however, that the Trust will be able to enter into interest rate swaps or to purchase interest rate caps or floors at prices or on terms the Adviser or Sub-Adviser believes are advantageous to the Trust. In addition, although the terms of interest rate swaps, caps and floors may provide for termination, there can be no assurance that the Trust will be able to terminate an interest rate swap or to sell or offset interest rate caps or floors that it has purchased.
The successful utilization of hedging and risk management transactions requires skills different from those needed in the selection of the Trusts portfolio securities and depends on the Advisers or Sub-Advisers ability to predict correctly the direction and degree of movements in interest rates. Although the Trust believes that use of the hedging and risk management techniques described above will benefit the Trust, if the Advisers or Sub-Advisers judgment about the direction or extent of the movement in interest rates is incorrect, the Trusts overall performance would be worse than if it had not entered into any such transactions. The Trust will incur brokerage and other costs in connection with its hedging transactions.
Lease Participations
Senior Loans that the Trust may acquire include participation interests in lease financings (Lease Participations) where the collateral quality, credit quality of the borrower, and the likelihood of payback are believed by the Adviser or Sub-Adviser to be the same as those applied to conventional Senior Loans. A Lease Participation is also required to have a floating interest rate that is indexed to a benchmark indicator of prevailing interest rates, such as LIBOR or the Prime Rate.
The credit quality standards and general requirements that the Trust applies to Lease Participations including collateral quality, the credit quality of the borrower and the likelihood of payback are substantially the same as those applied to conventional Senior Loans. A Lease Participation is also required to have a floating interest rate that is indexed to the federal funds rate, LIBOR, or Prime Rate in order to be eligible for investment.
The Office of the Comptroller of the Currency has established regulations which set forth circumstances under which national banks may engage in lease financings. Among other things, the regulation requires that a lease be a net-full payout lease representing the noncancelable obligation of the lessee and that the bank make certain determinations with respect to any estimated residual value of leased property relied upon by the bank to yield a full return on the lease. The Trust may invest in lease financings only if the Lease Participation meets these banking law requirements.
Lending Loan Interests and Other Portfolio Instruments
To generate additional income, the Trust may lend its portfolio securities, including interests in Senior Loans, in an amount equal to up to 33 1 / 3 % of the Trusts total assets to broker-dealers, major banks, or other recognized domestic institutional borrowers of securities. No lending may be made to any companies affiliated with the Adviser or Sub-Adviser. During the time portfolio securities are on loan, the borrower pays the Trust any dividends or interest paid on such securities and the Trust may invest the cash collateral and earn additional income, or it may receive an agreed-upon amount of interest income from the borrower who has delivered equivalent collateral or a letter of credit. As with other extensions of credit, there are risks of delay in recovery or even loss of rights in the collateral should the borrower fail financially.
The Trust may seek to increase its income by lending financial instruments in its portfolio in accordance with present regulatory policies, including those of the Board of Governors of the Federal Reserve System and the SEC. The lending of financial instruments is a common practice in the securities industry. The loans are required to be secured continuously by collateral, consistent with the requirements of the 1940 Act discussed below, maintained on a current basis at an amount at least equal to the market value of the portfolio instruments loaned. The Trust has the right to call a loan and obtain the portfolio instruments loaned at any time on such notice as specified in the transaction documents. For the duration of the loan, the Trust will continue to receive the equivalent of the interest paid by the issuer on the portfolio instruments loaned and may also receive compensation for the loan of the financial instrument. Any gain or loss in the market price of the instruments loaned that may occur during the term of the loan will be for the account of the Trust.
The Trust may lend its portfolio instruments so long as the terms and the structure of such loans are not inconsistent with the requirements of the 1940 Act, which currently require that: (a) the borrower pledge and maintain with the Trust collateral consisting of cash, a letter of credit issued by a domestic U.S. bank, or securities issued or guaranteed by the U.S. government having a value at all times not less than 100% of the value of the instruments loaned; (b) the borrowers add to such collateral whenever the price of the instruments loaned rises ( i.e. , the value of the loan is marked-to-market on a daily basis); (c) the loan be made subject to termination by the Trust at any time; and (d) the Trust receives reasonable interest on the loan (which may include the Trusts investing any cash collateral in interest bearing short-term investments), any distributions on the loaned instruments and increase in their market value. The Trust may lend its portfolio instruments to member banks of the Federal Reserve System, members of the NYSE or other entities determined by the Adviser or Sub-Adviser to be creditworthy. All relevant facts and circumstances, including the creditworthiness of the qualified institution, will be monitored by the Adviser or Sub-Adviser, and will be considered in making decisions with respect to the lending of portfolio instruments.
The Trust may pay reasonable negotiated fees in connection with loaned instruments. In addition, voting rights may pass with loaned securities but if a material event were to occur affecting such a loan, the Trust will retain the right to call the loan and vote the securities. If a default occurs by the other party to such transaction, the Trust will have contractual remedies pursuant to the agreements related to the transaction but such remedies may be subject to bankruptcy and insolvency laws which could materially and adversely affect the Trusts rights as a creditor. However, the loans will be made only to firms deemed by the Adviser or Sub-Adviser to be of good financial standing and when, in the judgment of the Adviser or Sub-Adviser, the consideration which can be earned currently from loans of this type justifies the attendant risk.
Originating Senior Loans Reliance on Agents
The Trust has the ability to act as an agent in originating and administering a loan on behalf of all lenders or as one of a group of co-agents in originating Senior Loans. However, the Trust has not acted as agent or co-agent on any loans, and has no present intention of doing so in the future. An agent for a loan is required to administer and manage the Senior Loan and to service or monitor the collateral. The agent is also responsible for the collection of principal, interest, and fee payments from the borrower and the apportionment of these payments to the credit of all lenders which are parties to the loan agreement. The agent is charged with the responsibility of monitoring compliance by the borrower with the restrictive covenants in the loan agreement and of notifying the lenders of any adverse change in the borrowers financial condition. In addition, the agent generally is responsible for determining that the lenders have obtained a perfected security interest in the collateral securing the Senior Loan.
Lenders generally rely on the agent to collect their portion of the payments on a Senior Loan and to use the appropriate creditor remedies against the borrower. Typically under loan agreements, the agent is given broad discretion in enforcing the loan agreement and is obligated to use the same care it would use in the management of its own property. The borrower compensates the agent for these services. Such compensation may include special fees paid on structuring and funding the Senior Loan and other fees on a continuing basis. The precise duties and rights of an agent are defined in the loan agreement.
When the Trust is an agent, it has as a party to the loan agreement, a direct contractual relationship with the borrower and, prior to allocating portions of the loan to lenders, if any, assumes all risks associated with the loan. The agent may enforce compliance by the borrower with the terms of the loan agreement. Agents also have voting and consent rights under the applicable loan agreement. Action subject to agent vote or consent generally requires the vote or consent of the holders of some specified percentage of the outstanding principal amount of the Senior Loan, which percentage varies depending on the relative loan agreement. Certain decisions, such as reducing the amount or increasing the time for payment of interest on or repayment of principal of a Senior Loan, or relating collateral therefore, frequently require the unanimous vote or consent of all lenders affected.
Pursuant to the terms of a loan agreement, the agent typically has sole responsibility for servicing and administering a loan on behalf of the other lenders. Each lender in a Senior Loan is generally responsible for performing its own credit analysis and its own investigation of the financial condition of the borrower. Generally, loan agreements will hold the agent liable for any action taken or omitted that amounts to gross negligence or willful misconduct. In the event of a borrowers default on a loan, the loan agreements provide that the lenders do not have recourse against the Trust for its activities as agent. Instead, lenders will be required to look to the borrower for recourse.
In a typical interest in a Senior Loan, the agent administers the loan and has the right to monitor the collateral. The agent is also required to segregate the principal and interest payments received from the borrower and to hold these payments for the benefit of the lenders. The Trust normally looks to the agent to collect and distribute principal of and interest on a Senior Loan. Furthermore, the Trust looks to the agent to use normal credit remedies, such as to foreclose on collateral, monitor credit loan covenants, and notify the lenders of any adverse changes in the borrowers financial condition or declarations of insolvency. At times the Trust may also negotiate with the agent regarding the agents exercise of credit remedies under a Senior Loan. The agent is compensated for these services by the borrower as set forth in the loan agreement. Such compensation may take the form of a fee or other amount paid upon the making of the Senior Loan and/or an ongoing fee or other amount.
The loan agreements in connection with Senior Loans set forth the standard of care to be exercised by the agents on behalf of the lenders and usually provide for the termination of the agents agency status in the event that it fails to act properly, becomes insolvent, enters Federal Deposit Insurance Corporation (FDIC) receivership, or if not FDIC insured, enters into bankruptcy or if the agent resigns. In the event an agent is unable to perform its obligations as agent, another lender would generally serve in that capacity.
Other Investment Companies
An investment company is a company engaged in the business of pooling investors money and trading in securities for them. Examples include face-amount certificate companies, unit investment trusts and management companies. When the Trust invests in other investment companies, shareholders of the Trust bear their proportionate share of the underlying investment companies fees and expenses.
The Trust may invest in other investment companies to the extent permitted under the 1940 Act and the rules, regulations, and exemptive orders thereunder. For so long as shares of the Trust are purchased by another fund in reliance on Section 12(d)(1)(G) of the 1940 Act, the Trust will not purchase securities of a registered open-end investment company or registered unit investment trust in reliance on Section 12(d)(1)(F) or Section 12(d)(1)(G) of the 1940 Act.
There are some potential disadvantages associated with investing in other investment companies. In addition to the advisory and operational fees, the Trust bears directly in connection with its own operation, the Trust would also bear its pro-rata portions of each other investment companys advisory and operational expenses.
When the Trust invests in other investment companies, you indirectly pay a proportionate share of the expenses of that other investment company (including management fees, administration fees, and custodial fees) in addition to the expenses of the Trust.
Additional Information on Senior Loans
Senior Loans are direct obligations of corporations or other business entities and are arranged by banks or other commercial lending institutions and made generally to finance internal growth, mergers, acquisitions, stock repurchases, and leveraged buyouts. Senior Loans usually include restrictive covenants which must be maintained by the borrower. Such covenants, in addition to the timely payment of interest and principal, may include mandatory prepayment provisions arising from free cash flow and restrictions on dividend payments, and usually state that a borrower must maintain specific minimum financial ratios as well as establishing limits on total debt. A breach of covenant, which is not waived by the agent, is normally an event of acceleration, i.e. , the agent has the right to call the outstanding Senior Loan. In addition, loan covenants may include mandatory prepayment provisions stemming from free cash flow. Free cash flow is cash that is in excess of capital expenditures plus debt service requirements of principal and interest. The free cash flow shall be applied to prepay the Senior Loan in an order of maturity described in the loan documents. Under certain interests in Senior Loans, the Trust may have an obligation to make additional loans upon demand by the borrower. The Trust intends to ensure its ability to satisfy such demands by segregating sufficient assets in high-quality, short-term liquid investments or by sufficiently maintaining unused borrowing capacity.
The Trust believes that the principal credit risk associated with acquiring loans from another lender is the credit risk associated with the borrower of the underlying loan. The Trust may incur additional credit risk; however, when the Trust acquires a participation in a loan from another lender because the Trust must assume the risk of insolvency or bankruptcy of the other lender from which the loan was acquired. However, in acquiring loans, the Trust conducts an analysis and evaluation of the financial condition of each such lender. In this regard, if the lenders have a long-term debt rating, the long-term debt of all such participants is rated BBB or better by Standard & Poors Ratings Services (S&P) or Baa or better by Moodys Investors Services, Inc. (Moodys), or has received a comparable rating by another nationally recognized rating service. In the absence of rated long-term debt, the lenders or, with respect to a bank, the holding company of such lenders have commercial paper outstanding which is rated at least A-1 by S&P or P-1 by Moodys. In the absence of such rated long-term debt or rated commercial paper, the Trust may acquire participations in loans from lenders whose long-term debt and commercial paper is of comparable quality to the foregoing rating standards as determined by the Adviser under the supervision of the Trustees. The Trust also diversifies its portfolio with respect to lenders from which the Trust acquires loans. (See, Investment Restrictions.)
Senior Loans, unlike certain bonds, usually do not have call protection. This means that investments comprising the Trusts portfolio, while having a stated one to ten-year term, may be prepaid, often without penalty. The Trust generally holds Senior Loans to maturity unless it becomes necessary to sell them to adjust the Trusts portfolio in accordance with the Advisers or Sub-Advisers view of current or expected economic or specific industry or borrower conditions.
Senior Loans frequently require full or partial prepayment of a loan when there are asset sales or a securities issuance. Prepayments on Senior Loans may also be made by the borrower at its election. The rate of such prepayments may be affected by, among other things, general business and economic conditions, as well as the financial status of the borrower. Prepayment would cause the actual duration of a Senior Loan to be shorter than its stated maturity. Prepayment may be deferred by the Trust. This should, however, allow the Trust to reinvest in a new loan and recognize as income any unamortized loan fees. In many cases this will result in a new facility fee payable to the Trust.
Because interest rates paid on these Senior Loans fluctuate periodically with the market, it is expected that the prepayment and a subsequent purchase of a new Senior Loan by the Trust will not have a material adverse impact on the yield of the portfolio. (See, Portfolio Transactions.)
Under a Senior Loan, the borrower generally must pledge as collateral, assets which may include one or more of the following: cash, accounts receivable, inventory, property, plant and equipment, both common and preferred stocks in its subsidiaries, trademarks, copyrights, patent rights, and franchise value. The Trust may also receive guarantees as a form of collateral. In some instances, a Senior Loan may be secured only by stocks in a borrower or its affiliates. However, there is no assurance that the liquidation of the existing collateral would satisfy the borrowers obligation in the event of nonpayment of scheduled interest or principal, or that such collateral could be readily liquidated.
Loan Participation and Assignments
The Trusts investment in loan participations typically will result in the Trust having a contractual relationship only with the lender and not with the borrower. The Trust will have the right to receive payments of principal, interest, and any fees to which it is entitled only from the lender selling the participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing participation, the Trust generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any right of set-off against the borrower, and the Trust may not directly benefit from any collateral supporting the loan in which it has purchased the participation. As a result, the Trust may be subject to the credit risk of both the borrower and the lender that is selling the participation. In the event of the insolvency of the lender selling a participation, the Trust may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower.
When the Trust purchases a loan assignment from lenders, it will acquire direct rights against the borrowers on the loan. Because assignments are arranged through private negotiations between potential assignees and potential assignors; however, the rights and obligations acquired by the Trust as the purchaser of an assignment may differ from, and be more limited than, those held by the assigning lender. Because there is no liquid market for such securities, the Trust anticipates that such securities could be sold only to a limited number of institutional investors. The lack of a liquid secondary market may have an adverse impact on the value of such securities and the Trusts ability to dispose of particular assignments or participation when necessary to meet redemption of Trust shares, to meet the Trusts liquidity needs or when necessary in response to a specific economic event, such as deterioration in the creditworthiness of the borrower. The lack of a liquid secondary market for assignments and participation also may make it more difficult for the Trust to value these securities for purposes of calculating its NAV.
The Trust may be required to pay and receive various fees and commissions in the process of purchasing, selling and holding loans. The fee component may include any, or a combination of, the following elements: arrangement fees, assignment fees, non-use fees, facility fees, letter of credit fees, and ticking fees. Arrangement fees are paid at the commencement of a loan as compensation for the initiation of the transaction. A non-use fee is paid based upon the amount committed but not used under the loan. Facility fees are on-going annual fees paid in connection with a loan. Letter of credit fees are paid if a loan involves a letter of credit. Ticking fees are paid from the initial commitment indication until loan closing if for an extended period. The amount of fees is negotiated at the time of transaction.
Other Investments
Assets not invested in Senior Loans will generally consist of other instruments, including loans to borrowers organized or located in countries outside the United States and outside U.S. territories and possessions or Canada; unsecured floating rate loans, notes and other debt instruments; floating rate subordinated loans (up to a maximum of 5% of the Trusts total assets); tranches of floating rate asset-backed securities, including structured notes, short-term debt securities, with remaining maturities of 120 days or less (which may have yields tied to the Prime Rate, commercial paper rates, the federal funds rate or LIBOR); and equity securities acquired in connection with investments in loans. Short-term debt instruments may include: (i) commercial paper rated A-1 by S&P or P-1 by Moodys, or of comparable quality as determined by the Adviser or Sub-Adviser; (ii) certificates of deposit, bankers acceptances, and other bank deposits and obligations; and (iii) securities issued or guaranteed by the U.S. government, its agencies or instrumentalities. Under normal circumstances, the Trust may invest in cash and/or
short-term instruments. During periods when, in the judgment of the Adviser or Sub-Adviser, a temporary defensive posture in the market is appropriate, the Trust may hold up to 100% of its assets in cash and/or in short-term debt instruments.
Repurchase Agreements
The Trust has the ability, pursuant to its investment objective and policies, to enter into repurchase agreements if the asset which is the subject of the repurchase is a loan. Such agreements may be considered to be loans by the Trust for purposes of the 1940 Act. Each repurchase agreement must be collateralized fully, in accordance with the provisions of Rule 5b-3 under the 1940 Act, at all times. Pursuant to such repurchase agreements, the Trust acquires securities from financial institutions such as brokers, dealers, and banks, subject to the sellers agreement to repurchase and the Trusts agreement to resell such securities at a mutually agreed upon date and price. The term of such an agreement is generally quite short, possibly overnight or for a few days, although it may extend over a number of months (up to one year) from the date of delivery. The repurchase price generally equals the price paid by the Trust plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the underlying portfolio security). The securities underlying a repurchase agreement will be marked-to-market every business day so that the value of the collateral is at least equal to the value of the loan, including the accrued interest thereon, and the Adviser or Sub-Adviser will monitor the value of the collateral. Securities subject to repurchase agreements will be held by the custodian or in the Federal Reserve/Treasury Book-Entry System. If the seller defaults on its repurchase obligation, the Trust will suffer a loss to the extent that the proceeds from a sale of the underlying securities are less than the repurchase price under the agreement. Bankruptcy or insolvency of such a defaulting seller may cause the Trusts rights with respect to such securities to be delayed or limited. To mitigate this risk, the Trust only enters into repurchase agreements with highly-rated, large financial institutions. The Trust may only enter into repurchase agreements that qualify for an exclusion from any automatic stay of creditors rights against the counterparty under applicable insolvency law in the event of the counterpartys insolvency.
Reverse Repurchase Agreements
The Trust has the ability, pursuant to its investment objective and policies, to enter into reverse repurchase agreements. A reverse repurchase agreement is a contract under which the Trust may sell and simultaneously obtain the commitment of the purchaser to sell the security back to the Trust at an agreed upon price on an agreed upon date. Reverse repurchase agreements will be considered borrowings by the Trust and as such, are subject to the restrictions on borrowing. Borrowings by the Trust create an opportunity for greater total return but at the same time increase exposure to capital risk. The Trust will maintain in a segregated account with its custodian cash or liquid high grade portfolio securities in an amount sufficient to cover its obligations with respect to the reverse repurchase agreements. The Trust will receive payment for such securities only upon physical delivery or evidence of book entry transfer by its custodian. Regulations of the SEC require either that securities sold by the Trust under a reverse repurchase agreement be segregated pending repurchase or that the proceeds be segregated on the Trusts books and records pending repurchase. Reverse repurchase agreements may involve certain risks in the event of default or insolvency of the other party, including possible loss from delays or restrictions upon the Trusts ability to dispose of the underlying securities.
MANAGEMENT OF THE TRUST
The business and affairs of the Trust are managed under the direction of the Trusts Board according to the applicable laws of the State of Massachusetts. The Board governs the Trust and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who oversee the Trusts activities, review contractual arrangements with companies that provide services to the Trust, and review the Trusts performance.
Set forth in the table below is information regarding each Trustee of the Trust.
Name, Address and Age |
|
Position(s)
|
|
Term of Office
|
|
Principal Occupation(s)
|
|
Number of Funds in
|
|
Other Board Positions Held by
|
Independent Trustees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colleen D. Baldwin 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 54 |
|
Trustee |
|
October 2007Present |
|
President, Glantuam Partners, LLC, a business consulting firm (January 2009 Present). |
|
164 |
|
DSM/Dentaquest Boston MA (February 2014 Present). |
|
|
|
|
|
|
|
|
|
|
|
John V. Boyer 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 60 |
|
Chairman
Trustee |
|
January 2014 Present
January 2005 Present |
|
President and Chief Executive Officer, Bechtler Arts Foundation, an arts and education foundation (January 2008 Present). |
|
164 |
|
None. |
|
|
|
|
|
|
|
|
|
|
|
Patricia W. Chadwick 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 65 |
|
Trustee |
|
January 2006 Present |
|
Consultant and President, Ravengate Partners LLC, a consulting firm that provides advice regarding financial markets and the global economy (January 2000 Present). |
|
164 |
|
Wisconsin Energy Corp. (June 2006 Present) and The Royce Funds (35 Funds) (December 2009 Present). |
|
|
|
|
|
|
|
|
|
|
|
Albert E. DePrince, Jr. 7337 East Doubletree Ranch Road Suite 100 Scottsdale, Arizona 85258 Age: 73 |
|
Trustee |
|
May 2013 Present |
|
Professor of Economics and Finance, Middle Tennessee State University (August 1991 Present) and various positions with Academy of Economics and Finance (2003 Present). |
|
164 |
|
None. |
|
|
|
|
|
|
|
|
|
|
|
Peter S. Drotch 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 72 |
|
Trustee |
|
October 2007 Present |
|
Retired. |
|
164 |
|
First Marblehead Corporation (September 2003 Present). |
|
|
|
|
|
|
|
|
|
|
|
J. Michael Earley 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 69 |
|
Trustee |
|
February 2002 Present |
|
Retired. |
|
164 |
|
None. |
(1) Trustees are considered for election by shareholders on an annual basis and serve until their successors are duly elected and qualified. The tenure of each Trustee Trustee who is not an interested person, as defined in the 1940 Act, of the Trust, (as defined below, Independent Trustee) is subject to the Boards retirement policy, which states that each duly elected or appointed Independent Trustee shall retire from and cease to be a member of the Board of Trustees at the close of business on December 31 of the calendar year in which the Independent Trustee attains the age of 73. A majority vote of the Boards other Independent Trustees may extend the retirement date of an Independent Trustee if the retirement would trigger a requirement to hold a meeting of shareholders of the Trust under applicable law, in whether for purposes of appointing a successor to the Independent Trustee or otherwise comply with applicable law, in which case the extension would apply until such time as the shareholder meeting can be held or is no longer required (as determined by the vote of a majority of the other Independent Trustees).
(2) For the purposes of this table Fund Complex means the Voya family of funds, including the following investment companies: Voya Asia Pacific High Dividend Equity Income Fund; Voya Balanced Portfolio, Inc.; Voya Emerging Markets High Dividend Equity Fund; Voya Equity Trust; Voya Funds Trust; Voya Global Advantage and Premium Opportunity Fund; Voya Global Equity Dividend and Premium Opportunity Fund; Voya Infrastructure, Industrials and Materials Fund; Voya Intermediate Bond Portfolio; Voya International High Dividend Equity Income Fund; Voya Investors Trust; Voya Money Market Portfolio; Voya Mutual Funds; Voya Partners, Inc.; Voya Prime Rate Trust; Voya Natural Resources Equity Income Fund; Voya Senior Income Fund; Voya Separate Portfolios Trust; Voya Series Fund, Inc.; Voya Strategic Allocation Portfolios, Inc.; Voya Variable Funds; Voya Variable Insurance Trust; Voya Variable Portfolios, Inc.; and Voya Variable Products Trust. The number of Funds in the Fund Complex is as of May 31, 2014.
(3) Mr. Mathews is deemed to be an interested person, as defined in the 1940 Act, because of his current affiliation with any of the Voya funds, Voya Financial, Inc. or any of Voya Financial, Inc.s affiliates.
Information Regarding Officers of the Trust
Information about the Trusts officers is set forth in the table below :
Name, Address and Age |
|
Position(s) Held with the
|
|
Term of Office and Length of Time Served (1) |
|
Principal Occupation(s) During the Last Five Years |
Shaun P. Mathews 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 58 |
|
President and Chief Executive Officer
|
|
November 2006 - Present
|
|
President and Chief Executive Officer, Voya Investments, LLC (November 2006 Present). |
|
|
|
|
|
|
|
Michael J. Roland 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 56 |
|
Executive Vice President
|
|
February 2002 Present
|
|
Managing Director and Chief Operating Officer, Voya Investments, LLC and Voya Funds Services, LLC (April 2012 Present). Formerly, Chief Compliance Officer Directed Services LLC and Voya Investments, LLC (March 2011 Decembert 2013), Executive Vice President and Chief Operating Officer, Voya Investments, LLC and Voya Funds Services, LLC (January 2007 April 2012) and Chief Compliance Officer, Voya Family of Funds (March 2011 February 2012). |
|
|
|
|
|
|
|
Stanley D. Vyner 230 Park Avenue New York, New York 10169 Age: 64 |
|
Executive Vice President
Chief Investment Risk Officer
|
|
August 2003 Present
September 2009 - Present |
|
Executive Vice President, Voya Investments, LLC (July 2000 Present) and Chief Investment Risk Officer, Voya Investments, LLC (January 2003 Present). |
|
|
|
|
|
|
|
Kevin M. Gleason 7337 East Doubletree Ranch Road Suite 100 Scottsdale, Arizona 85258 Age: 47 |
|
Chief Compliance Officer
|
|
February 2012 Present |
|
Senior Vice President, Voya Investments LLC (February 2012 Present). Formerly, Assistant General Counsel and Assistant Secretary, The Northwestern Mutual Life Insurance Company, (June 2004 January 2012). |
|
|
|
|
|
|
|
Todd Modic 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 46 |
|
Senior Vice President, Chief/Principal Financial Officer and Assistant Secretary
|
|
March 2005 Present |
|
Senior Vice President, Voya Funds Services, LLC (March 2005 Present). |
Name, Address and Age |
|
Position(s) Held with the
|
|
Term of Office and Length of Time Served (1) |
|
Principal Occupation(s) During the Last Five Years |
Daniel A. Norman 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 56 |
|
Senior Vice President
Treasurer
|
|
April 1995 - Present
June 1997 - Present
|
|
Senior Vice President and Group Head, Voya Investment Management Co. LLC (January 2000 Present). |
|
|
|
|
|
|
|
William H. Rivoir III 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 63 |
|
Senior Vice President and Assistant Secretary |
|
February 2001 - Present |
|
Senior Vice President, Voya Investment Management Co. LLC (January 2004 Present). |
|
|
|
|
|
|
|
Kimberly A. Anderson 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 49 |
|
Senior Vice President
|
|
November 2003 Present |
|
Senior Vice President, Voya Investments, LLC (October 2003 Present).
|
|
|
|
|
|
|
|
Jeffrey A. Bakalar 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age : 54 |
|
Senior Vice President |
|
November 1999 - Present |
|
Senior Vice President and Group Head, Voya Investment Management Co. LLC (January 2000 Present). |
|
|
|
|
|
|
|
Elliot A. Rosen 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age : 61 |
|
Senior Vice President |
|
May 2002 - Present |
|
Senior Vice President, Voya Investment Management Co. LLC (February 1999 - Present). |
|
|
|
|
|
|
|
Julius Drelick III 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 47 |
|
Senior Vice President
|
|
July 2012 Present |
|
Senior Vice President Fund Compliance, Voya Funds Services, LLC (June 2012 Present). Formerly, Vice President Platform Product Management and Project Management, Voya Investments, LLC (April 2007 June 2012). |
|
|
|
|
|
|
|
Robert Terris 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 44 |
|
Senior Vice President |
|
May 2006 Present |
|
Senior Vice President, Head of Division Operations, Voya Funds Services, LLC (January 2006 Present). |
|
|
|
|
|
|
|
Fred Bedoya 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 41 |
|
Vice President and Treasurer
|
|
September 2012 Present |
|
Vice President, Voya Funds Services, LLC (March 2012 Present). Formerly, Assistant Vice President Director, Voya Funds Services, LLC (March 2003 March 2012). |
|
|
|
|
|
|
|
Maria M. Anderson 7337 East Doubletree Ranch Road, |
|
Vice President |
|
September 2004 Present |
|
Vice President, Voya Funds Services, LLC (September 2004 Present). |
Name, Address and Age |
|
Position(s) Held with the
|
|
Term of Office and Length of Time Served (1) |
|
Principal Occupation(s) During the Last Five Years |
Suite 100 Scottsdale, Arizona 85258 Age: 56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Lauren D. Bensinger 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 60 |
|
Vice President |
|
August 2003 Present |
|
Vice President, Voya Investments, LLC and Voya Funds Services, LLC (February 1996 Present); Director of Compliance, Voya Investments, LLC (October 2004 Present); and Vice President and Money Laundering Reporting Officer, Voya Investments Distributor, LLC (April 2010 Present). Formerly, Chief Compliance Officer, Voya Investments Distributor, LLC (August 1995 April 2010). |
|
|
|
|
|
|
|
Robyn L. Ichilov 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 46 |
|
Vice President |
|
November 1997 Present |
|
Vice President, Voya Funds Services, LLC (November 1995 Present) and Voya Investments, LLC (August 1997 Present). Formerly, Treasurer, Voya Family of Funds (November 1999 February 2012). |
|
|
|
|
|
|
|
Jason Kadavy 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 38 |
|
Vice President |
|
September 2012 Present |
|
Vice President, Voya Funds Services, LLC (July 2007 Present). |
|
|
|
|
|
|
|
Kimberly K. Springer 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 57 |
|
Vice President |
|
March 2006 Present |
|
Vice President, Platform Product Management and Project Management; Voya Investments, LLC (July 2012 Present); Vice President, Voya Investment Management Voya Family of Funds (March 2010 Present); and Vice President, Voya Funds Services, LLC (March 2006 Present). Formerly, Managing Paralegal, Registration Statements (June 2003 July 2012). |
|
|
|
|
|
|
|
Craig Wheeler 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 45 |
|
Vice President |
|
May 2013 - Present |
|
Vice President Director of Tax, Voya Funds Services, LLC (March 2013 Present). Formerly, Assistant Vice President Director of Tax, Voya Funds Services, LLC (March 2008 March 2013). |
|
|
|
|
|
|
|
Huey P. Falgout, Jr. 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 50 |
|
Secretary |
|
August 2003 Present |
|
Senior Vice President and Chief Counsel, Voya Investment Management Voya Family of Funds (March 2010 Present). Formerly, Chief Counsel, ING Americas, U.S. Legal Services (October 2003 March 2010). |
|
|
|
|
|
|
|
Paul Caldarelli 7337 East Doubletree Ranch Road, Suite 100 Scottsdale, Arizona 85258 Age: 62 |
|
Assistant Secretary |
|
June 2010 Present |
|
Vice President and Senior Counsel, Voya Investment Management Voya Family of Funds (March 2010 Present). Formerly, Senior Counsel, ING Americas, U.S. Legal Services (April 2008 March 2010) and Counsel, ING Americas, U.S. Legal Services (May 2005 April 2008). |
|
|
|
|
|
|
|
Theresa K. Kelety 7337 East Doubletree Ranch Road, |
|
Assistant Secretary |
|
August 2003 Present |
|
Vice President and Senior Counsel, Voya Investment Management Family of Funds (March 2010 Present). Formerly, Senior Counsel, ING |
Name, Address and Age |
|
Position(s) Held with the
|
|
Term of Office and Length of Time Served (1) |
|
Principal Occupation(s) During the Last Five Years |
Suite 100 Scottsdale, Arizona 85258 Age: 51 |
|
|
|
|
|
Americas, U.S. Legal Services (April 2008 March 2010) and Counsel, ING Americas, U.S. Legal Services (April 2003 April 2008). |
(1) The Officers hold office until the next annual meeting of the Trustees and until their successors shall have been elected and qualified.
The Board of Trustees
The Trust is governed by the Trusts Board, which oversees the Trusts business and affairs. The Board delegates the day-to-day management of the Trust to the Trusts officers and to various service providers that have been contractually retained to provide such day-to-day services. The Voya entities that render services to the Trust do so pursuant to contracts that have been approved by the Board. The Trustees are experienced executives who, among other duties, oversee the Trusts activities, review contractual arrangements with companies that provide services to the Trust, and review the Trusts investment performance.
The Board Leadership Structure and Related Matters
Effective May 21, 2013, the membership of the Boards of Directors/Trustees overseeing the funds in the Voya family of funds were consolidated (the Consolidation) so that the same members serve on each board in the Voya family of funds. Following the Consolidation, the Board is now comprised of twelve (12) members, eleven (11) of whom are independent or disinterested persons, which means that they are not interested persons of the funds in the Voya family of funds as defined in Section 2(a)(19) of the 1940 Act (Independent Trustees). Prior to May 21, 2013, the Board was composed of ten (10) members, eight (8) of whom were Independent Trustees.
The Trust is one (1) of 24 registered investment companies (with a combined total of approximately 164 separate series) in the Voya family of funds and all of the Trustees serve as members of, as applicable, each investment companys/trusts Board of Directors or Board of Trustees. The Board employs substantially the same leadership structure with respect to each of these investment companies.
One of the Independent Trustees, currently John V. Boyer, serves as the Chairman of the Board of the Trust. The responsibilities of the Board Chairman include: coordinating with management in the preparation of agendas for Board meetings; presiding at Board meetings; between Board meetings, serving as a primary liaison with other Trustees, Officers of the Trust, management personnel and legal counsel to the Independent Trustees; and such other duties as the Board periodically may determine. Mr. Boyer does not hold a position with any firm that is a sponsor of the Trust. The designation of an individual as the Independent Chairman does not impose on such Independent Trustee any duties, obligations or liabilities greater than the duties, obligations or liabilities imposed on such person as a member of the Board, generally.
The Board performs many of its oversight and other activities through the committee structure described below in the Board Committees section. Each Committee operates pursuant to a written Charter approved by the Board. The Board currently conducts regular meetings eight (8) times a year. Six (6) of these regular meetings consist of sessions held over a two-day period and two (2) of these meetings consist of a one-day session. In addition, during the course of a year, the Board and many of its Committees typically hold special meetings by telephone or in person to discuss specific matters that require action prior to the next regular meetings. The Independent Trustees have engaged independent legal counsel to assist them in performing their oversight responsibilities.
The Board believes that its committee structure is an effective means of empowering the Trustees to perform their fiduciary and other duties. For example, the Boards committee structure facilitates, as appropriate, the ability of individual Board members to receive detailed presentations on topics under their review and to develop increased familiarity with respect to such topics and with key personnel at relevant service providers. At least annually, with guidance from its Nominating and Governance Committee, the Board analyzes whether there are potential means to enhance the efficiency and effectiveness of the Boards operations.
Board Committees
Audit Committee . The Board has established an Audit Committee whose functions include, among other things: (i) meeting with the independent registered public accounting firm of the Trust to review the scope of the Trusts audit, the Trusts financial statements and accounting controls; (ii) meeting with management concerning these matters, internal audit activities, and other matters; and (iii) overseeing the implementation of the Voya funds valuation procedures and the fair value determinations made with respect to securities held by the Voya funds for which market value quotations are not readily available. The Audit Committee currently consists of six (6) Independent Trustees. The following Trustees currently serve as members of the Audit Committee: Ms. Baldwin and Messrs. Drotch, Earley, Kenny, Obermeyer, and Vincent. Mr. Earley currently serves as Chairperson of the Audit Committee. Ms. Baldwin and Messrs. Drotch, Earley, Kenny, Obermeyer, and Vincent have each been designated as Audit Committee Financial Experts under the Sarbanes-Oxley Act of 2002. The Audit Committee currently meets regularly five (5) times per year, and may hold special meetings by telephone or in person to discuss specific matters that may require action prior to the next regular meeting. The Audit Committee held five (5) meetings during the fiscal year ended February 28, 2014.
The Audit Committee and Compliance Committee sometimes meet jointly to consider matters that are reviewed by both Committees. The Committees held three (3) such additional joint meetings during the fiscal year ended February 28, 2014.
Compliance Committee . The Board has established a Compliance Committee for the purpose of, among other things: (i) providing oversight with respect to compliance by the funds in the Voya family of funds and their service providers with applicable laws, regulations, and internal policies and procedures affecting the operations of the Trust; (ii) serving as a committee, and in such capacity, to receive, retain, and act upon reports of evidence of possible material violations of applicable U.S. federal or state securities laws and breaches of fiduciary duty arising under U.S. federal or state laws; (iii) coordinating activities between the Board and the Chief Compliance Officer (CCO) of the funds; (iv) facilitating information flow among Board members and the CCO between Board meetings; (v) working with the CCO and management to identify the types of reports to be submitted by the CCO to the Compliance Committee and the Board; (vi) making recommendations regarding the role, performance, and oversight of the CCO; (vii) overseeing the implementation of the Voya funds valuation procedures and the fair value determinations made with respect to securities held by the Voya funds for which market value quotations are not readily available; (viii) overseeing managements administration of proxy voting; and (ix) overseeing the effectiveness of brokerage usage by the Trusts advisers or sub-advisers, as applicable, and compliance with regulations regarding the allocation of brokerage for services.
The Compliance Committee currently consists of five (5) Independent Trustees: Dr. DePrince, Mses. Chadwick and Pressler, and Messrs. Boyer and Jones. Mr. Jones currently serves as Chairperson of the Compliance Committee. The Compliance Committee currently meets regularly four (4) times per year, and may hold special meetings by telephone or in person to discuss specific matters that may require action prior to the next regular meeting. The Compliance Committee held five (5) meetings during the fiscal year ended February 28, 2014.
The Audit Committee and Compliance Committee sometimes meet jointly to consider matters that are reviewed by both Committees. The Committees held three (3) such additional joint meetings during the fiscal year ended February 28, 2014.
Contracts Committee. The Board has established a Contracts Committee for the purpose of overseeing the annual renewal process relating to investment advisory and sub-advisory agreements and, at the discretion of the Board, other agreements or plans involving the Voya family of funds (including the Trust). The responsibilities of the Contracts Committee include, among other things: (i) identifying the scope and format of information to be provided by service providers in connection with applicable contract approvals or renewals; (ii) providing guidance to independent legal counsel regarding specific information requests to be made by such counsel on behalf of the Trustees; (iii) evaluating regulatory and other developments that might have an impact on applicable approval and
renewal processes; (iv) reporting to the Trustees its recommendations and decisions regarding the foregoing matters; (v) assisting in the preparation of a written record of the factors considered by Trustees relating to the approval and renewal of advisory and sub-advisory agreements; (vi) recommending to the Board specific steps to be taken by it regarding the contracts approval and renewal process, including, for example, proposed schedules of meetings by the Trustees; and (vii) otherwise providing assistance in connection with Board decisions to renew, reject, or modify agreements or plans.
As of January 23, 2014, the Contracts Committee currently consists of all eleven (11) of the Independent Trustees of the Board: Dr. DePrince, Mses. Baldwin, Chadwick and Pressler, and Messrs. Boyer, Drotch, Earley, Jones, Kenny, Obermeyer, and Vincent. Ms. Pressler currently serves as Chairperson of the Contracts Committee. Prior to January 23, 2014, the Contracts Committee (the Prior Contracts Committee) was made up of eight (8) Independent Trustees and met regularly seven (7) times per year and held special meetings by telephone or in person to discuss specific matters that may require action prior to the next regular meeting. The Prior Contracts Committee held eight (8) meetings during the fiscal year ended February 28, 2014. It is expected that the Contracts Committee will also meet regularly seven (7) times per year and may hold special meetings by telephone or in person to discuss specific matters that may require action prior to the next regular meeting.
The Board has established a Contracts Sub-Committee for the purpose of initially reviewing substantially all of the matters considered by the Contracts Committee. The Contracts Sub-Committee currently consists of seven (7) Independent Trustees. The following Trustees serve as members of the Contracts Sub-Committee: Dr. DePrince, Mses. Baldwin, Chadwick and Pressler, and Messrs. Boyer, Obermeyer, and Vincent. Ms. Pressler currently serves as Chairperson of the Contracts Sub-Committee. The Contracts Sub-Committee was newly established on January 23, 2014 and did not meet during the fiscal year ended February 28, 2014. It is expected that the Contracts Sub-Committee will meet regularly seven (7) times per year and may hold special meetings by telephone or in person to discuss specific matters that may require action prior to the next regular meeting.
Investment Review Committees . The Board has established, for all of the funds under its direction, the following three (3) Investment Review Committees: (i) the Joint Investment Review Committee (Joint IRC); (ii) the Investment Review Committee for the Domestic Equity Funds (DE IRC); and (iii) the Investment Review Commmitte for the International/Balanced/Fixed-Income Funds (I/B/F IRC). Each of the Investment Review Committees perform the following functions, among other things: (i) monitoring the investment performance of the funds in the Voya family of funds that are assigned to that Committee; and (ii) make recommendations to the Board with respect to investment management activities performed by the advisers and/or sub-advisers on behalf of such Voya funds, and reviewing and making recommendations regarding proposals by management to retain new or additional sub-advisers for these Voya funds. The Trust is monitored by the Joint IRC. Each committee is described below:
The Joint IRC currently consists of eleven (11) Independent Trustees and one (1) Trustee who is an interested person of the funds in the Voya family of funds, as defined in the 1940 Act (Interested Trustee). The following Trustees serve as members of the Joint IRC: Dr. DePrince, Mses. Baldwin, Chadwick and Pressler, and Messrs. Boyer, Drotch, Earley, Jones, Kenny, Mathews, Obermeyer, and Vincent. Mr. Obermeyer currently serves as Chairperson of the Joint IRC. The Joint IRC was newly established on January 23, 2014 and did not meet during the fiscal year ended February 28, 2014. Prior to January 23, 2014, the Board held joint meetings of the I/B/F IRC and the DE IRC. It is expected that the Joint IRC will meet regularly six (6) times per year.
The DE IRC currently consists of six (6) Independent Trustees. The following Trustees serve as members of the DE IRC: Ms. Baldwin, and Messrs. Boyer, Drotch, Jones, Obermeyer, and Vincent. Ms. Baldwin currently serves as Chairperson of the DE IRC. The DE IRC, which currently meets regularly six (6) times per year, held six (6) meetings during the fiscal year ended February 28, 2014.
The I/B/F IRC currently consists of five (5) Independent Trustees. The following Trustees serve as members of the IBF IRC: Dr. DePrince, Mses. Chadwick and Pressler and Messrs. Earley, Kenny, and Mathews. Ms. Chadwick currently serves as Chairperson of the I/B/F IRC. The I/B/F IRC, which currently meets regularly six (6) times per year, held six (6) meetings during the fiscal year ended February 28, 2014.
Nominating and Governance Committee . The Board has established a Nominating and Governance Committee for the purpose of, among other things: (i) identifying and recommending to the Board candidates it proposes for nomination to fill Independent Trustee vacancies on the Board; (ii) reviewing workload and capabilities of Independent Trustees and recommending changes to the size or composition of the Board, as necessary; (iii) monitoring regulatory developments and recommending modifications to the Committees responsibilities; (iv) considering and, if appropriate, recommending the creation of additional committees or changes to Trustee policies and procedures based on rule changes and best practices in corporate governance; (v) conducting an annual review of the membership and chairpersons of all Board committees and of practices relating to such membership and chairpersons; (vi) undertaking a periodic study of compensation paid to independent board members of investment companies and making recommendations for any compensation changes for the Independent Trustees; (vii) overseeing the Boards annual self-evaluation process; (viii) developing (with assistance from management) an annual meeting calendar for the Board and its committees; and (ix) overseeing actions to facilitate attendance by Independent Trustees at relevant educational seminars and similar programs.
In evaluating potential candidates to fill Independent Trustee vacancies on the Board, the Nominating and Governance Committee will consider a variety of factors, but it has not at this time set any specific minimum qualifications that must be met. Specific qualifications of candidates for Board membership will be based on the needs of the Board at the time of nomination. The Nominating and Governance Committee will consider nominations received from shareholders and shall assess shareholder nominees in the same manner as it reviews nominees that it identifies as potential candidates. A shareholder nominee for Trustee should be submitted in writing to the Trustees Secretary at 7337 East Doubletree Ranch Road, Suite 100, Scottsdale, Arizona 85258. Any such shareholder nomination should include at least the following information as to each individual proposed for nominations as Trustee: such persons written consent to be named in a proxy statement as a nominee (if nominated) and to serve as a Trustee (if elected), and all information relating to such individual that is required to be disclosed in the solicitation of proxies for election of Trustees, or is otherwise required, in each case under applicable federal securities laws, rules, and regulations, including such information as the Board may reasonably deem necessary to satisfy its oversight and due diligence duties.
The Secretary shall submit all nominations received in a timely manner to the Nominating and Governance Committee. To be timely in connection with a shareholder meeting to elect Trustees, any such submission must be delivered to the Trusts Secretary not earlier than the 90th day prior to such meeting and not later than the close of business on the later of the 60th day prior to such meeting or the 10th day following the day on which public announcement of the date of the meeting is first made, by either the disclosure in a press release or in a document publicly filed by the Trust with the SEC.
The Nominating and Governance Committee currently consists of five (5) Independent Trustees. The following Trustees serve as members of the Nominating and Governance Committee: Ms. Baldwin and Messrs. Boyer, Drotch, Jones, and Kenny. Mr. Kenny currently serves as Chairperson of the Nominating and Governance Committee. The Nominating and Governance Committee typically meets three (3) times per year and on an as-needed bases. The Committee held three (3) meetings during the fiscal year ended February 28, 2014.
The Boards Risk Oversight Role
The day-to-day management of various risks relating to the administration and operation of the Trust is the responsibility of management and other service providers retained by the Board or by management, most of whom employ professional personnel who have risk management responsibilities. The Board oversees this risk management function consistent with and as part of its oversight duties. The Board performs this risk management oversight function directly and, with respect to various matters, through its committees. The following description provides an
overview of many, but not all, aspects of the Boards oversight of risk management for the Trust. In this connection, the Board has been advised that it is not practicable to identify all of the risks that may impact the Trust or to develop procedures or controls that are designed to eliminate all such risk exposures, and that applicable securities law regulations do not contemplate that all such risks be identified and addressed.
The Board, working with management personnel and other service providers, has endeavored to identify the primary risks that confront the Trust. In general, these risks include, among others: (i) investment risks; (ii) credit risks; (iii) liquidity risks; (iv) valuation risks; (v) operational risks; (vi) reputational risks; (vii) regulatory risks; (viii) risks related to potential legislative changes; and (ix) the risk of conflicts of interest affecting Voya affiliates in managing the Trust. The Board has adopted and periodically reviews various policies and procedures that are designed to address these and other risks confronting the Fund. In addition, many service providers to the Trust have adopted their own policies, procedures, and controls designed to address particular risks to the Trust. The Board and persons retained to render advice and service to the Board periodically review and/or monitor changes to and developments relating to the effectiveness of these policies and procedures.
The Board oversees risk management activities in part through receipt and review by the Board or its committees of regular and special reports, presentations and other information from officers of the Fund, including the CCOs for the Trust and its investment adviser and the Trusts Chief Investment Risk Officer (CIRO), and from other service providers. For example, management personnel and the other persons make regular reports and presentations to: (i) the Compliance Committee regarding compliance with regulatory requirements; (ii) the Investment Review Committees regarding investment activities and strategies that may pose particular risks; (iii) the Audit Committee with respect to financial reporting controls and internal audit activities; (iv) the Nominating and Governance Committee regarding corporate governance and best practice developments; and (v) the Contracts Committee regarding regulatory and related developments that might impact the retention of service providers to the Company. The CIRO oversees an Investment Risk Department (IRD) that provides an independent source of analysis and research for Board members in connection with their oversight of the investment process and performance of portfolio managers. Among its other duties, the IRD seeks to identify and, where practicable, measure the investment risks being taken by the Funds portfolio managers. Although the IRD works closely with management of the Fund in performing its duties, the CIRO is directly accountable to and maintains an ongoing dialogue with the Independent Trustees.
Qualifications of the Trustees
The Board believes that each of the Trustees is qualified to serve as a Trustee of the Trust based on its review of the experience, qualifications, attributes and skills of each Trustee. The Board bases this conclusion on its consideration of various criteria, no one of which is controlling. Among others, the Board has considered the following factors with respect to each Trustee: strong character and high integrity; an ability to review, evaluate, analyze and discuss information provided; the ability to exercise effective business judgment in protecting shareholder interests while taking into account different points of view; a background in financial, investment, accounting, business, regulatory or other skills that would be relevant to the performance of a Trustees duties; the ability and willingness to commit the time necessary to perform his or her duties; and the ability to work in a collegial manner with other Board members. Each Trustees ability to perform his or her duties effectively is evidenced by his or her: experience in the investment management business; related consulting experience; other professional experience; experience serving on the boards of directors of other public companies; educational background and professional training; prior experience serving on the Board of Trustees of the Trust, as well as the boards of other investment companies in the Voya family of funds and/or of other investment companies; and experience as attendees or participants in conferences and seminars that are focused on investment company matters and/or duties that are specific to board members of registered investment companies.
Information indicating certain of the specific experience and qualifications of each Trustee relevant to the Boards belief that the Trustee should serve in this capacity is provided in the table above that provides information about each Trustee. That table includes, for each Trustee, positions held with the Trust, the length of such service, principal occupations during the past five (5) years, the number of series within the Voya family of funds for which the Trustee
serves as a Board member and certain directorships held during the past five (5) years. Set forth below are certain additional specific experiences, qualifications, attributes or skills that the Board believes support a conclusion that each Trustee should serve as a Board member in light of the Trusts business and structure.
Colleen D. Baldwin has been a Trustee of the Trust and a board member of other investment companies in the Voya family of funds since 2007. She also served as the Chairperson of the Boards DE IRC since January 23, 2014 and, prior to that, as the Chairperson of the Boards Nominating and Governance Committee since 2009. Ms. Baldwin is currently an Independent Director of DSM/Dentaquest and is a member of its Audit and Finance/Investment Review Committees. Ms. Baldwin has been President of Glantuam Partners, LLC, a business consulting firm, since 2009. Prior to that, she served in senior positions at the following financial services firms: Chief Operating Officer for Ivy Asset Management, Inc. (2002-2004), a hedge fund manager; Chief Operating Officer and Head of Global Business and Product Development for AIG Global Investment Group (1995-2002), a global investment management firm; Senior Vice President at Bankers Trust Company (1994-1995); and Senior Managing Director at J.P. Morgan & Company (1987-1994). Ms. Baldwin began her career in 1981 at AT&T/Bell Labs as a systems analyst. Ms. Baldwin holds a B.S. from Fordham University and an M.B.A. from Pace University.
John V. Boyer has been a Trustee of the Trust and a board member of other investment companies in the Voya family of funds since 2005. He also has served as Chairperson of the Trusts Board since January 22, 2014, and prior to that, as Chairperson of the Trusts I/B/F IRC since 2006. Since 2008, Mr. Boyer has been President of the Bechtler Arts Foundation for which, among his other duties, Mr. Boyer oversees all fiduciary aspects of the Foundation and assists in the oversight of the Foundations endowment fund. Previously, he served as President and Chief Executive Officer of the Franklin and Eleanor Roosevelt Institute (2006-2007) and as Executive Director of The Mark Twain House & Museum (1989-2006) where he was responsible for overseeing business operations, including endowment funds. He also served as a board member of certain predecessor mutual funds of the Voya family of funds (1997-2005). Mr. Boyer holds a B.A. from the University of California, Santa Barbara and an M.F.A. from Princeton University.
Patricia W. Chadwick has been a Trustee of the Trust and a board member of other investment companies in the Voya family of funds since 2006. She also has served as Chairperson of the Trusts I/B/F IRC since January 23, 2014 and, prior to that, as Chairperson of the Trusts DE IRC since 2007. Since 2000, Ms. Chadwick has been the Founder and President of Ravengate Partners LLC, a consulting firm that provides advice regarding financial markets and the global economy. She also is a director of The Royce Funds (since 2009), Wisconsin Energy Corp. (since 2006), and AMICA Mutual Insurance Company (since 1992). Previously, she served in senior roles at several major financial services firms where her duties included the management of corporate pension funds, endowments, and foundations, as well as management responsibilities for an asset management business. Ms. Chadwick holds a B.A. from Boston University and is a Chartered Financial Analyst.
Dr. Albert E. DePrince, Jr. has been a Trustee of the Trust since May 21, 2013, the date of the Consolidation, and a board member of other Voya funds since 1998. Dr. DePrince has been a professor of Economics and Finance at Middle Tennessee State University since 1991. Prior to joining the faculty at Middle Tennessee State University, Dr. DePrince served in various business positions, including 12 years at Marine Midland Bank in New York City, where he held the positions of Chief Economist and Senior Vice President, and nine years as an economist with the Federal Reserve Bank of New York. Dr. DePrince holds a B.A. in Economics from Bucknell University, an M.A. in Economics from the University of Michigan, and a Ph.D. in Economics from New York University. Dr. DePrince also served as Director at the Business and Economic Research Center at Middle Tennessee State University from 1999 to 2002 and has published numerous scholarly papers and journal articles in the areas of financial markets, financial institutions, mutual fund performance, and monetary policy.
Peter S. Drotch has been a Trustee of the Trust and a board member of other investment companies in the Voya family of funds since 2007. Prior to his retirement in 2000, he was a partner at the accounting firm of PricewaterhouseCoopers LLP, where he was the leader of the firms U.S. Investment Management practice group and a member of its global leadership team where he acquired extensive experience with respect to audits and other financial matters relating to registered investment companies. Since his retirement, he also has served on the boards of registered investment companies in other fund complexes (the State Street Research Funds and BlackRock Funds)
from 2005 to 2007 and as a consultant with respect to investment company regulatory compliance matters. Mr. Drotch is also a Director of First Marblehead Corporation (student loans) and Tufts Health Plan (health insurance) a Director of the University of Connecticut Foundation, Inc., and a member of the General Counsel of the Investment Company Institutes Independent Directors Council. Mr. Drotch holds a B.S. from the University of Connecticut and is a retired Certified Public Accountant.
J. Michael Earley has been a Trustee of the Trust and a board member of other investment companies in the Voya family of funds since 2002. He also has served as Chairperson of the Trusts Audit Committee since 2003. Mr. Earley retired in 2008 as President and Chief Executive Officer of Bankers Trust Company, N.A. (Des Moines, Iowa), where he had worked since 1992. He also has served on the boards of directors of that company (1992-2009) and of Midamerica Financial Corporation (2002-2009), and as a board member of certain predecessor mutual funds of the Voya family of funds (1997-2002). Mr. Earley holds a B.B.A. and a J.D. from the University of Iowa.
Russell H. Jones has been a Trustee of the Trust since May 21, 2013, the date of the Consolidation, and a board member of other Voya funds since December 2007. He has also served as Chairperson of the Trusts Compliance Committee since January 23, 2014. From 1973 until his retirement in 2008, Mr. Jones served in various positions at Kaman Corporation, an aerospace and industrial distribution manufacturer, including Senior Vice President, Chief Investment Officer and Treasurer, Principal Investor Relations Officer, Principal Public Relations Officer and Corporate Parent Treasurer. Mr. Jones served as an Independent Director and Chair of the Contracts Committee for CIGNA Mutual Funds from 1995 until 2005. Mr. Jones also served as President of the Hartford Area Business Economists from 1986 until 1987. Mr. Jones holds a B.A. from the University of Connecticut and an M.A. from the Hartford Seminary.
Patrick W. Kenny has been a Trustee of the Trust and a board member of other investment companies in the Voya family of funds since 2005. He also has served as the Chairperson of the Trusts Nominating and Governance Committee since January 23, 2014 and, prior to that, Chairperson of the Trusts Compliance Committee since 2006. He previously served as President and Chief Executive Officer (2001-2009) of the International Insurance Society (insurance trade association), Executive Vice President (1998-2001) of Frontier Insurance Group (property and casualty insurance company), Senior Vice President (1995-1998) of SS&C Technologies (software and technology company), Chief Financial Officer (1988-1994) of Aetna Life & Casualty Company (multi-line insurance company), and as Partner (until 1988) of KPMG (accounting firm). Mr. Kenny currently serves (since 2004) on the board of directors of Assured Guaranty Ltd. (provider of financial guaranty insurance) and previously served on the boards of Odyssey Re Holdings Corporation (multi-line reinsurance company) (2006-2009) and of certain predecessor mutual funds of the Voya family of funds (2002-2005). Mr. Kenny holds a B.B.A. from the University of Notre Dame and an M.S. from the University of Missouri and is a Certified Public Accountant.
Shaun P. Mathews has been a Trustee of the Fund and a board member of other investment companies in the Voya family of funds since 2007. He also is President and Chief Executive Officer of Voya Investments, LLC (2006 to present). Mr. Mathews previously served as President of Voya Mutual Funds and Investment Products (2004-2006) and several other senior management positions in various aspects of the financial services business.
Joseph E. Obermeyer has been a Trustee of the Trust since May 21, 2013, the date of the Consolidation, and a board member of other Voya funds since 2003. He has also served as the Chairperson of the Trusts Joint IRC since January 23, 2014. Mr. Obermeyer is the founder and President of Obermeyer & Associates, Inc., a provider of financial and economic consulting services since 1999. Prior to founding Obermeyer & Associates, Mr. Obermeyer had more than 15 years of experience in accounting, including serving as a Senior Manager at Arthur Andersen LLP from 1995 until 1999. Previously, Mr. Obermeyer served as a Senior Manager at Coopers & Lybrand LLP from 1993 until 1995, as a Manager at Price Waterhouse from 1988 until 1993, Second Vice President from 1985 until 1988 at Smith Barney, and as a consultant with Arthur Andersen & Co. from 1984 until 1985. Mr. Obermeyer holds a B.A. in Business Administration from the University of Cincinnati, an M.B.A. from Indiana University, and post graduate certificates from the University of Tilburg and INSEAD.
Sheryl K. Pressler has been a Trustee of the Trust and a board member of other investment companies in the Voya family of funds since 2006. She also has served as Chairperson of both the Trusts Contracts Committee and Contracts Sub-Committee since 2007, and January 23, 2014, respectively. Ms. Pressler has served as a consultant on financial matters since 2001. Previously, she held various senior positions involving financial services, including as Chief Executive Officer (2000-2001) of Lend Lease Real Estate Investments, Inc. (real estate investment management and mortgage servicing firm), Chief Investment Officer (1994-2000) of California Public Employees Retirement System (state pension fund), Director of Stillwater Mining Company (May 2002 May 2013), and Director of Retirement Funds Management (1981-1994) of McDonnell Douglas Corporation (aircraft manufacturer). Ms. Pressler holds a B.A. from Webster University and an M.B.A. from Washington University.
Roger B. Vincent has been a Trustee of the Trust and a board member of other investment companies in the Voya family of funds since 2002. He also previously served as Chairman of the Board of Trustees 2007 January 21, 2014 and, prior to that, as Chairperson of the Contracts Committee and the DE IRC. Mr. Vincent retired in 2011 as President of Springwell Corporation (a corporate finance firm). He is a Director of UGI Corporation and UGI Utilities, Inc. (since 2006). He previously worked for 20 years at Bankers Trust Company where he was a Managing Director and a member of the banks senior executive partnership. He also previously served as a Director of AmeriGas Partners, L.P. (1998-2006), Tatham Offshore, Inc. (1996-2000), and Petrolane, Inc. (1993-1995), and as a board member of certain predecessor funds of the Voya family of funds (1993-2002). Mr. Vincent is a board member of the Mutual Fund Directors Forum and a past Director of the National Association of Corporate Directors. Mr. Vincent holds a B.S. from Yale University and an M.B.A. from Harvard University.
Trustee Ownership of Securities
In order to further align the interests of the Independent Trustees with shareholders, it is the policy of the Board for Independent Trustees to own, beneficially, shares of one or more funds in the Voya family of funds at all times (Ownership Policy). For this purpose, beneficial ownership of shares of a Voya fund includes, in addition to direct ownership of Voya fund shares, ownership of a variable annuity contract or a variable life insurance policy whose proceeds are invested in a Voya fund within the Voya family of funds, as well as deferred compensation payments under the Boards deferred compensation arrangements pursuant to which the future value of such payments is based on the notional value of designated funds within the Voya family of funds.
Prior to May 22, 2014, under this Ownership Policy, the initial value of investments in the Voya family of funds that Trustees were required to beneficially own must have been equal to at least $100,000. On May 22, 2014, the Board amended the Ownership Policy (the Amended Ownership Policy) to increase the initial value of investments that a Trustee must own in the Voya family of funds to $230,000. Pursuant to the Amended Ownership Policy, the Trustees will be required to beneficially own at least $230,000 of investments in the Voya family of funds within a reasonable period of time. The Ownership Policy provides that a new Trustee shall satisfy the foregoing requirements within a reasonable amount of time, not to exceed three years, after becoming a Trustee. A decline in the value of any Trustees investments in the Voya family of funds will not cause a Trustee to have to make any additional investments under this Ownership Policy. As of December 31, 2013, all Independent Trustees are in compliance with this Ownership Policy.
Investment in mutual funds of the Voya family of funds by the Trustees pursuant to this Ownership Policy are subject to: (1) policies, applied by the mutual funds of the Voya family of funds to other similar investors, that are designed to prevent inappropriate market timing trading practices; and (2) to any provisions of the Code of Ethics for the Voya family of funds that otherwise apply to the Trustees.
Trustees Trust Equity Ownership Positions
The following table sets forth information regarding each Trustees ownership of equity securities in the Trust and the aggregate holdings of shares of equity securities of all funds in the Voya family of funds overseen by the Trustees for the calendar year ended December 31, 2013:
(1) Held in a Deferred Compensation Account and/or 401(k) account.
Independent Trustee Ownership of Securities of the Adviser, the Underwriter and their Affiliates
The following tables sets forth information regarding each Independent Trustees (and his or her immediate family members) share ownership in securities of the Trusts investment adviser or principal underwriter, and the ownership of securities in an entity controlling, controlled by or under common control with the investment adviser or principal underwriter of the Trust (not including registered investment companies) as of December 31, 2013.
Name of Trustee |
|
Name of Owners
|
|
Company |
|
Title of Class |
|
Value of
|
|
Percentage of
|
|
Colleen D. Baldwin |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
John V. Boyer |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
Patricia W. Chadwick |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
Albert E. DePrince, Jr. |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
Peter S. Drotch |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
J. Michael Earley |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
Russell H. Jones |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
Patrick W. Kenny |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
Joseph E. Obermeyer |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
Sheryl K. Pressler |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
Roger B. Vincent |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
Trustee Compensation
Each Trustee is reimbursed for reasonable expenses incurred in connection with each meeting of the Board or any of its Committee meetings attended. Each Independent Trustee is compensated for his or her services, on a quarterly basis, according to a fee schedule adopted by the Board. The current fee schedule consists of an annual retainer, compensation for Board and Committee Chairpersons, and additional compensation for attendance at regularly scheduled meetings. The Board may from time to time designate other meetings as subject to compensation.
Effective January 1, 2014, the Trust pays each Trustee who is not an interested person of the Trust his or her pro rata share, as described below, of: (i) an annual retainer of $230,000; (ii) Mr. Boyer, as Chairperson of the Board, receives an additional annual retainer of $100,000; (iii) Mses. Baldwin, Chadwick, and Pressler and Messrs. Earley, Jones, Kenny, and Obermeyer as Chairpersons of Committees of the Board, each receives an additional annual retainer of $30,000, $30,000, $65,000, $25,000, $25,000, $25,000, and $30,000, respectively; (iv) $10,000 per attendance at any of the regularly scheduled meetings (four (4) quarterly meetings, two (2) auxiliary meetings, and two (2) annual contract review meetings); and (v) out-of-pocket expenses. The Board at its discretion may from time to time designate other special meetings as subject to an attendance fee in the amount of $5,000 for in-person meetings and $2,500 for special telephonic meetings.
Prior to January 1, 2014, the Trust paid each Trustee who was not an interested person of the Trust a pro rata share, as described below, of: (i) an annual retainer of $200,000; (ii) Mr. Vincent, as Chairman of the Board, received an additional annual retainer of $80,000; (iii) Mses. Baldwin, Chadwick, and Pressler and Messrs. Earley, Boyer, and Kenny, as Chairpersons of Committees of the Board, each received an additional annual retainer of $25,000, $30,000, $65,000, $25,000, $30,000, and $25,000, respectively; (iv) $10,000 per attendance at any of the regularly scheduled meetings (four (4) quarterly meetings, two (2) auxiliary meetings, and two (2) annual contract review meetings); and (v) out-of-pocket expenses. The Board at its discretion could from time to time designate other special meetings as subject to an attendance fee in the amount of $5,000 for in-person meetings and $2,500 for special telephonic meetings.
The pro rata share paid by the Trust is based on the Trusts average net assets as a percentage of the average net assets of all the funds managed by the Adviser or its affiliate, Directed Services LLC, for which the Trustees serve in common as Trustees.
Future Compensation Payment
Certain future payment arrangements were in place prior to the Consolidation. More particularly, each non-interested Trustee, with the exception of Dr. DePrince and Messrs. Gavin, Jones, and Obermeyer, who was a Trustee on or before May 9, 2007, and who will have served as a non-interested Trustee for five or more years for one or more in the Voya family of funds is entitled to a future payment (Future Payment), if such Trustee: (i) retires in accordance with the Boards retirement policy; (ii) dies; or (iii) becomes disabled. The Future Payment shall be made promptly to, as applicable, the Trustee or the Trustees estate, in an amount equal to two (2) times the annual compensation payable to such Trustee, as in effect at the time of his or her retirement, death or disability if the Trustee had served as Trustee for at least five years as of May 9, 2007, or in a lesser amount calculated based on the proportion of time served by such Trustee (as compared to five years) as of May 9, 2007. The annual compensation determination shall be based upon the annual Board membership retainer fee in effect at the time of that Trustees retirement, death or disability (but not any separate annual retainer fees for chairpersons of committees and of the Board), provided that the annual compensation used for this purpose shall not exceed the annual retainer fees as of May 9, 2007. This amount shall be paid by the Voya fund or Voya funds on whose Board the Trustee was serving at the time of his or her retirement, death, or disability. Each applicable Trustee may elect to receive payment of his or her benefit in a lump sum or in three substantially equal payments.
Compensation Table
The following table sets forth information provided by the Trusts Adviser regarding compensation of the Trustees by the Trust and other funds managed by the Adviser and its affiliates for the fiscal year ended February 28, 2014. Officers of the Trust and Trustees who are interested persons of the Trust do not receive any compensation from the Trust or any other funds managed by the Adviser or its affiliates.
Name of Trustee |
|
Aggregate
|
|
Pension or
|
|
Estimated
|
|
Total
|
|
||
Colleen D. Baldwin(3) |
|
$ |
2,823 |
|
N/A |
|
N/A |
|
$ |
312,500 |
(1) |
John V. Boyer(3) |
|
$ |
2,848 |
|
N/A |
|
N/A |
|
$ |
317,500 |
(1) |
Patricia W. Chadwick |
|
$ |
2,843 |
|
N/A |
|
N/A |
|
$ |
317,500 |
(1) |
Albert E. DePrince, Jr. |
|
$ |
1,524 |
|
N/A |
|
N/A |
|
$ |
242,731 |
(2) |
Peter S. Drotch |
|
$ |
2,393 |
|
N/A |
|
N/A |
|
$ |
265,000 |
(1) |
J. Michael Earley |
|
$ |
2,778 |
|
N/A |
|
N/A |
|
$ |
310,000 |
(1) |
Martin J. Gavin(3) (4) |
|
$ |
753 |
|
N/A |
|
N/A |
|
$ |
125,943 |
(2) |
Russell H. Jones(3) |
|
$ |
1,524 |
|
N/A |
|
N/A |
|
$ |
229,078 |
(2) |
Patrick W. Kenny(3) |
|
$ |
2,813 |
|
N/A |
|
N/A |
|
$ |
312,500 |
(1) |
Shaun P. Mathews(5) |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
||
Joseph E. Obermeyer(3) |
|
$ |
1,524 |
|
N/A |
|
N/A |
|
$ |
238,830 |
(2) |
Sheryl K. Pressler |
|
$ |
3,161 |
|
N/A |
|
N/A |
|
$ |
352,500 |
(1) |
Roger B. Vincent |
|
$ |
3,297 |
|
N/A |
|
N/A |
|
$ |
367,500 |
(1) |
(1) Represents compensation from: (1) for the period from May 21, 2013 to February 28, 2014, 169 funds (total funds in the Fund Complex as of February 28, 2014); and (2) for the period from March 1, 2013 to May 20, 2013 145 funds overseen by the Board member prior to the Consolidation).
(2) Represents compensation from: (1) for the period from May 21, 2013 to February 28, 2014, 169 funds (total funds in the Fund Complex as of February 28, 2014); and (2) for the period from March 1, 2013 to May 20, 2013, 34 funds overseen by the Board member prior to the Consolidation).
(3) For the fiscal year ended February 28, 2014, Ms. Baldwin, and Messrs. Boyer, Gavin, Jones, Kenny, and Obermeyer deferred $100,000, $20,000, $50,513, $35,000, $76,208, and $21,391, respectively, of their compensation from the Fund Complex.
(4) Mr. Gavin resigned as a Trustee, effective September 12, 2013.
(5) Mr. Mathews is an interested person, as defined by the 1940 Act, because of his current affiliation with any of the Voya funds, Voya Financial, Inc., or any of Voya Financial, Inc.s affiliates.
CODE OF ETHICS
The Distributor, the Adviser, the Sub-Adviser, and the Trust have each adopted a code of ethics (Code of Ethics or written supervisory procedures) governing personal trading activities of all Trustees, Officers of the Trust, and the Distributor and persons who, in connection with their regular functions, play a role in the recommendation of any purchase or sale of a security by the Trust or obtain information pertaining to such purchase or sale. The Code of Ethics is intended to prohibit fraud against the Trust that may arise from personal trading of securities that may be purchased or held by the Trust or of Trust shares. The Code of Ethics also prohibits short-term trading of the Trust by persons subject to the Code of Ethics. Personal trading is permitted by such persons subject to certain restrictions; however such persons are generally required to pre-clear all security transactions with the Trusts Compliance Department and to report all transactions on a regular basis. The Sub-Adviser has adopted its own Code of Ethics to govern the personal trading activities of its personnel.
The Code of Ethics can be reviewed and copied at the SECs Public Reference Room located at 100 F Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at (202) 551-8090. The Code of Ethics is available on the SECs website (www.sec.gov) and copies may also be obtained at prescribed rates by electronic request at publicinfo@sec.gov, or by writing the SECs Public Reference Section at the address listed above.
PROXY VOTING PROCEDURES
The Board has adopted proxy voting procedures and guidelines to govern the voting of proxies relating to the Trusts portfolio securities. The Trusts procedures delegate to Voya Investments the authority to vote proxies relating to portfolio securities and provide a method for responding to potential conflicts of interest. In delegating voting authority to Voya Investments, the Board has also approved Voya Investments proxy voting procedures, which require Voya Investments to vote proxies in accordance with the Trusts proxy voting procedures and guidelines. An independent proxy voting service has been retained to assist in the voting of Trust proxies through the provision of vote analysis, implementation and recordkeeping and disclosure services. In addition, the Compliance Committee oversees the implementation of the Trusts proxy voting procedures. A copy of the proxy voting procedures and guidelines of the Trust, including the proxy voting procedures of Voya Investments, is attached hereto as Appendix A. No later than August 31 st of each year, information regarding how the Trust voted proxies relating to portfolio securities for the one-year period ending June 30 th is available through Voyas website (www.voyainvestments.com) or by accessing the SECs EDGAR database (www.sec.gov).
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Control is defined by the 1940 Act as the beneficial ownership, either directly or through one or more controlled companies, of more than 25% of the voting securities of a company. A control person may be able to take action regarding the Trust without the consent or approval of other shareholders. As of June 16, 2014 no person owned beneficially, or of record, more than 25% of the Trust.
As of June 16, 2014, the Trustees and Officers of the Trust as a group owned beneficially less than 1% of the Trusts Common Shares.
As of June 16, 2014, no person to the knowledge of the Trust, owned beneficially or of record more than 5% of the outstanding Common Shares of the Trust except as set forth below:
Name and Address |
|
Class and Type
|
|
Percentage of Class |
|
Percentage of Trust |
|
Cede & Co. PO Box 20 Bowling Green Station New York, NY 10274-0020 |
|
Beneficial Owner |
|
80.26 |
% |
80.26 |
% |
|
|
|
|
|
|
|
|
Voya Prime Rate Trust Treasury Account Attn: Voya Control Dept. 4400 Computer Drive Westborough, MA 01581-1755 |
|
Beneficial Owner |
|
15.63 |
% |
15.63 |
% |
INVESTMENT MANAGEMENT AND OTHER SERVICE PROVIDERS
ADVISER
The investment adviser for the Trust is Voya Investments, which is registered with the SEC as an investment adviser and serves as an investment adviser to registered investment companies (or series thereof), as well as structured finance vehicles. Voya Investments, subject to the authority of the Board, has the overall responsibility for the management of the Trusts portfolio subject to delegation of certain responsibilities to Voya IM. Voya Investments and Voya IM are indirect, wholly-owned subsidiaries of Voya Financial, Inc. Voya Financial, Inc. is a U.S.-based financial institution whose subsidiaries operate in the retirement, investment, and insurance industries. As of the date of this SAI, Voya Financial, Inc. is a subsidiary of ING Groep N.V. (ING Groep). ING Groep is a global financial institution of Dutch origin with operations in more than 40 countries. Voya Investments became an investment management firm in April 1995.
On February 26, 2001, the name of the Adviser changed from ING Pilgrim Investments, Inc. to ING Pilgrim Investments, LLC. On March 1, 2002, the name of the Adviser was changed from ING Pilgrim Investments, LLC to ING Investments, LLC. On May 1, 2014, the name of the Adviser was changed from ING Investments, LLC to Voya Investments, LLC.
Voya Investments serves pursuant to an investment management agreement (Investment Advisory Agreement) between Voya Investments and the Trust. The Investment Advisory Agreement requires Voya Investments to oversee the provisions of all investment advisory and portfolio management services of the Trust. Pursuant to a sub-advisory agreement (Sub-Advisory Agreement) Voya Investments has delegated certain management responsibilities to the Sub-Adviser of the Trust. Voya Investments oversees the investment management of the Sub-Adviser.
The Investment Advisory Agreement requires Voya Investments to provide, subject to the supervision of the Board, investment advice and investment services to the Trust and to furnish advice and recommendations with respect to investment of the Trusts assets and the purchase or sale of its portfolio securities. Voya Investments also provides investment research and analysis. The Investment Advisory Agreement provides that Voya Investments is not subject to liability to the Trust for any act or omission in the course of, or connected with, rendering services under the Agreement, except by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of its obligations and duties under the Investment Advisory Agreement.
After an initial term of two years, the Investment Advisory Agreement and Sub-Advisory Agreement continue in effect from year to year so long as such continuance is specifically approved at least annually by: (a) the Board; or (b) the vote of a majority (as defined in the 1940 Act) of the Trusts outstanding shares voting as a single class; provided that in either event the continuance is also approved by at least a majority of the Board who are not interested persons (as defined in the 1940 Act) of the Adviser or Sub-Adviser, as the case may be, by vote cast in person at a meeting called for the purpose of voting on such approval.
The Investment Advisory Agreement is terminable without penalty with not less than sixty (60) days notice by the Board or by a vote of the holders of a majority of the Trusts outstanding shares voting as a single class, or upon not less than sixty (60) days notice by the Adviser. The Investment Advisory Agreement will terminate automatically in the event of its assignment (as defined in the 1940 Act).
Approval of Advisory Agreement
For information regarding the basis for the Boards November 2012 approval of the investment advisory relationship and the Boards January 2013 approval of the investment advisory relationship in connection with the IPO, please refer to the Trusts annual shareholder report dated February 28, 2013.
ING Groep Restructuring
In October 2009, ING Groep submitted a restructuring plan (the Restructuring Plan) to the European Commission in order to receive approval for state aid granted to ING Groep by the Kingdom of the Netherlands in November 2008 and March 2009. To receive approval for this state aid, ING Groep was required to divest its insurance and investment management businesses, including Voya Financial, Inc., before the end of 2013. In November 2012, the Restructuring Plan was amended to permit ING Groep additional time to complete the divestment. Pursuant to the amended Restructuring Plan, ING Groep must divest at least 25% of Voya Financial, Inc. by the end of 2013, more than 50% by the end of 2014, and the remaining interest by the end of 2016 (such divestment, the Separation Plan).
In May 2013, Voya Financial, Inc. conducted an initial public offering of Voya Financial, Inc. common stock (the IPO). In October 2013, ING Groep divested additional shares in a secondary offering of common stock of Voya Financial, Inc. In March, 2014, ING Groep divested additional shares, reducing its ownership interest in Voya Financial, Inc. below 50%. Voya Financial, Inc. did not receive any proceeds from these offerings.
ING Groep has stated that it intends to sell its remaining interest in Voya Financial, Inc. over time. While the base case for the remainder of the Separation Plan is the divestment of ING Groeps remaining interest in one or more broadly distributed offerings, all options remain open and it is possible that ING Groeps divestment of its remaining interest in Voya Financial, Inc. may take place by means of a sale to a single buyer or group of buyers.
It is anticipated that one or more of the transactions contemplated by the Separation Plan would result in the automatic termination of the existing Investment Advisory and Sub-Advisory Agreements under which the Adviser and Sub-Adviser provide services to the Trust. In order to ensure that the existing investment advisory and sub-advisory services can continue uninterrupted, the Board approved the new advisory and sub-advisory agreements for the Trust, as applicable, in connection with the IPO. Shareholders of the Trust approved new advisory and sub-advisory agreements prompted by the IPO, as well as any future advisory and sub-advisory agreements prompted by the Separation Plan that are approved by the Board and whose terms are not materially different from the current agreements. This means that shareholders may not have another opportunity to vote on a new agreement with the Adviser or an affiliated Sub-Adviser even if they undergo a change of control, as long as no single person or group of persons acting together gains control (as defined in the 1940 Act) of Voya Financial, Inc.
The Separation Plan, whether implemented through public offerings or other means, may be disruptive to the businesses of Voya Financial, Inc. and its subsidiaries, including the Adviser and affiliated entities that provide services to the Trust, and may cause, among other things, interruption of business operations or services, diversion of managements attention from day-to-day operations, reduced access to capital, and loss of key employees or customers. The completion of the Separation Plan is expected to result in the Advisers loss of access to the resources of ING Groep, which could adversely affect its business. Since a portion of the shares of Voya Financial, Inc., as a standalone entity, are publicly held, it is subject to the reporting requirements of the Securities Exchange Act of 1934 as well as other U.S. government and state regulations, and subject to the risk of changing regulation.
The Separation Plan may be implemented in phases. During the time that ING Groep retains a majority interest in Voya Financial, Inc., circumstances affecting ING Groep, including restrictions or requirements imposed on ING Groep by European and other authorities, may also affect Voya Financial, Inc. A failure to complete the Separation Plan could create uncertainty about the nature of the relationship between Voya Financial, Inc. and ING Groep, and could adversely affect Voya Financial, Inc. and the Adviser and its affiliates. Currently, the Adviser and its affiliates do not anticipate that the Separation Plan will have a material adverse impact on their operations or the Trust and its operations.
Advisory Fees
The Adviser receives an annual fee, payable monthly, in an amount equal to 0.80% of the Trusts average daily gross asset value, minus the sum of the Trusts accrued and unpaid dividends on any outstanding preferred shares and accrued liabilities (other than liabilities for the principal amount of any borrowings incurred, commercial paper or notes issued by the Trust and the liquidation preference of any outstanding preferred shares) (Managed Assets). This definition includes the assets acquired through the Trusts use of leverage.
Advisory Fees Waived or Recouped
Voya Investments has entered into an expense limitation agreement with the Trust pursuant to which Voya Investments has agreed to waive or limit its fees. In connection with this agreement and certain U.S. tax requirements, Voya Investments will assume other expenses so that the total annual ordinary operating expenses of this Trust which exclude interest, taxes, brokerage commissions, other investment-related costs, extraordinary expenses such as litigation, other expenses not incurred in the ordinary course of the Trusts business, and expenses of any counsel or other persons or services retained by the Trusts Trustees who are not interested persons (as defined in the 1940 Act) of Voya Investments or a Sub-Adviser do not exceed the following expense limitations:
Trust |
|
|
|
|
|
Voya Prime Rate Trust |
|
1.05% of average daily Managed Assets(1) plus 0.15% of average daily net assets |
(1) Managed Assets are defined as the Trusts average daily gross asset value, minus the sum of the Trusts accrued and unpaid dividends on any outstanding preferred shares and accrued liabilities (other than liabilities for the principal amount of any borrowings incurred, commercial paper or notes issued by the Trust and the liquidation preference of any outstanding preferred shares).
The Trust may, at a later date, reimburse Voya Investments for management fees waived and other expenses assumed by Voya Investments during the previous thirty-six (36) months but only if, after such reimbursement, the Trusts expense ratio does not exceed the percentage described above. Voya Investments will only be reimbursed for fees waived or expenses assumed after the effective date of the expense limitation agreement.
The expense limitation agreement is contractual and, after the initial term, the expense limitation agreement shall continue until July 1, 2015 and shall renew automatically for one-year terms unless Voya Investments provides written notice of termination of the agreement to a lead Independent Trustee of the Board within ninety (90) days prior to the end of the then-current term for the Trust or upon termination of the Advisory Agreement. The expense limitation agreement may also be terminated by the Trust, without payment of any penalty, upon written notice to Voya Investments at its principal place of business within ninety (90) days of the end of the then-current term for the Trust.
Total Advisory Fees Paid
For the fiscal years ended February 28, 2014, February 28, 2013, and February 29, 2012,Voya Investments was paid $10,245,189, $9,685,176, and $9,527,214, respectively, for services rendered to the Trust.
SUB-ADVISER
The Investment Advisory Agreement for the Trust provides that Voya Investments, with the approval of the Trusts Board, may select and employ an investment adviser to serve as a Sub-Adviser to the Trust, shall monitor the Sub-Advisers investment programs and results, and shall coordinate the investment activities of the Sub-Adviser to ensure compliance with regulatory restrictions. Voya Investments pays all of its expenses arising from the performance of its obligations under the Investment Advisory Agreement, including all fees payable to the Sub-Adviser, and executive salaries and expenses of the officers of the Trust who are employees of Voya Investments. The Sub-Adviser pays all of its expenses arising from the performance of its obligations under the Sub-Advisory Agreement.
Voya IM serves as Sub-Adviser to the Trust pursuant to the Sub-Advisory Agreement between Voya Investments and Voya IM. The Sub-Advisory Agreement requires Voya IM to provide, subject to the supervision of the Board and Voya Investments, a continuous investment program for the Trust and to determine the composition of the assets of the Trust, including determination of the purchase, retention, or sale of the securities, cash, and other investments for the Trust, in accordance with the Trusts investment objective, policies and restrictions and applicable laws and regulations. The Sub-Advisory Agreement also requires Voya IM to use reasonable compliance techniques as the Sub-Adviser or the Board may reasonably adopt, including any written compliance procedures.
The Sub-Advisory Agreement may be terminated at any time by the Trust by a vote of the majority of the Board or by a vote of a majority of the outstanding securities. The Sub-Advisory Agreement also may be terminated by: (i) Voya Investments at any time, upon sixty (60) days written notice to the Trust and the Sub-Adviser; (ii) at any time, without payment of any penalty by the Trust, by the Trusts Board or a majority of the outstanding voting securities of the Trust upon sixty (60) days written notice to Voya Investments and the Sub-Adviser; or (iii) by the Sub-Adviser upon three (3) months written notice unless the Trust or Voya Investments requests additional time to find a replacement for the Sub-Adviser, in which case, the Sub-Adviser shall allow the additional time, requested by the Trust or Voya Investments, not to exceed three (3) additional months beyond the initial three (3) month notice period provided; however, that the Sub-Adviser may terminate the Sub-Advisory Agreement at any time without penalty, effective upon written notice to Voya Investments and the Trust, in the event either the Sub-Adviser (acting in good faith) or Voya Investments ceases to be registered as an investment adviser under the Investment Advisers Act of 1940, as amended or otherwise becomes legally incapable of providing investment management services pursuant to its respective contract with the Trust, or in the event Voya Investments becomes bankrupt or otherwise incapable of carrying out its obligations under the Sub-Advisory Agreement, or in the event that the Sub-Adviser does not receive compensation for its services from Voya Investments or the Trust as required by the terms of the Sub-Advisory Agreement. Otherwise, the Sub-Advisory Agreement will remain in effect for two years and will, thereafter, continue in effect from year to year, subject to the annual approval of the Board, on behalf of the Trust, or the vote of a majority of the outstanding voting securities, and the vote, cast in person at a meeting duly called and held, of a majority of the Trustees, on behalf of the Trust, who are not parties to the Sub-Advisory Agreement or interested persons (as defined in the 1940 Act) of any such party. The Sub-Advisory Agreement will terminate automatically in the event of an assignment (as defined in the 1940 Act).
In this capacity, Voya IM, subject to the supervision and control of Voya Investments and the Trustees of the Trust, will manage the Trusts portfolio investments, consistently with its investment objective, and execute any of the Trusts investment policies that it deems appropriate to utilize from time to time.
Approval of Sub-Advisory Agreement
For information regarding the basis for the Boards November 2012 approval of the investment sub-advisory relationship and the Boards January 2013 approval of the investment sub-advisory relationship in connection with the IPO, please refer to the Trusts annual shareholder report dated February 28, 2013.
Sub-Advisory Fee
For its services, Voya IM is entitled to receive a sub-advisory fee of 0.3600%, expressed as an annual rate based on the average daily Managed Assets of the Trust, and paid by Voya Investments.
Total Sub-Advisory Fees Paid
For the fiscal years ended February 28, 2014, February 28, 2013, and February 29, 2012, Voya Investments paid Voya IM, in its capacity as Sub-Adviser, $4,610,335, $4,358,337, and $4,287,738, respectively, in sub-advisory fees.
PORTFOLIO MANAGERS
Other Accounts Managed
The following table shows the number of accounts and total assets in the accounts managed by each portfolio manager as of February 28, 2014:
|
|
Registered Investment
|
|
Other Pooled Investment
|
|
Other Accounts |
|
|||||||||
Portfolio
|
|
Number of
|
|
Total Assets |
|
Number of
|
|
Total Assets |
|
Number of
|
|
Total Assets |
|
|||
Daniel A. Norman |
|
3 |
|
$ |
3,338,195,900 |
|
23 |
|
$ |
14,266,509,329 |
|
5 |
|
$ |
1,529,253,642 |
|
Jeffrey A. Bakalar |
|
3 |
|
$ |
3,338,195,900 |
|
23 |
|
$ |
14,266,509,329 |
|
5 |
|
$ |
1,529,253,642 |
|
*16 of these accounts, with assets totaling $6,639,435,733 have management fees that are partially based upon performance.
Potential Material Conflicts of Interest
A portfolio manager may be subject to potential conflicts of interest because the portfolio manager is responsible for other accounts in addition to the Trust. These other accounts may include, among others, other mutual funds, separately managed advisory accounts, commingled trust accounts, insurance separate accounts, wrap fee programs and hedge funds. Potential conflicts may arise out of the implementation of differing investment strategies for the portfolio managers various accounts, the allocation of investment opportunities among those accounts or differences in the advisory fees paid by the portfolio managers accounts.
A potential conflict of interest may arise as a result of the portfolio managers responsibility for multiple accounts with similar investment guidelines. Under these circumstances, a potential investment may be suitable for more than one of the portfolio managers accounts but the quantity of the investment available for purchase is less than the aggregate amount the accounts would ideally devote to the opportunity. Similar conflicts may arise when multiple accounts seek to dispose of the same investment.
A portfolio manager may also manage accounts whose objectives and policies differ from those of the Trust. These differences may be such that under certain circumstances, trading activity appropriate for one account managed by the portfolio manager may have adverse consequences for another account managed by the portfolio manager. For example, if an account were to sell a significant position in a security which could cause the market price of that security to decrease, while the Trust maintained its position in that security.
A potential conflict may arise when a portfolio manager is responsible for accounts that have different advisory fees the difference in the fees may create an incentive for the portfolio manager to favor one account over another, for example, in terms of access to particularly appealing investment opportunities. This conflict may be heightened where an account is subject to a performance-based fee.
As part of its compliance program, Voya IM has adopted policies and procedures reasonably designed to address the potential conflicts of interest described above.
Finally, a potential conflict of interest may arise because the investment mandates for certain other accounts, such as hedge funds, may allow extensive use of short sales which, in theory, could allow them to enter into short positions in securities where other accounts hold long positions. Voya IM has policies and procedures reasonably designed to limit and monitor short sales by the other accounts to avoid harm to the Trust.
Compensation
Compensation consists of: (i) a fixed base salary; (ii) a bonus which is based on Voya IMs performance, one-, three- and five-year pre-tax performance of the accounts the portfolio managers are primarily and jointly responsible for relative to account benchmarks, peer universe performance, and revenue growth and net cash flow growth (changes in the accounts net assets attributable to changes in the value of the accounts investments) of the accounts they are responsible for; and (iii) long-term equity awards tied to the performance of our parent company, Voya Financial, Inc. and/or a notional investment in a pre-defined set of Voya IM sub-advised funds.
Portfolio managers are also eligible to receive an annual cash incentive award delivered in some combination of cash and a deferred award in the form of Voya stock. The overall design of the annual incentive plan was developed to tie pay to both performance and cash flows, structured in such a way as to drive performance and promote retention of top talent. As with base salary compensation, individual target awards are determined and set based on external market data and internal comparators. Investment performance is measured on both relative and absolute performance in all areas.
Voya IM has a defined index (the Standard & Poors LSTA Leveraged Loan Index) set performance goals to appropriately reflect requirements for the investment team. The measures for each team are outlined on a scorecard that is reviewed on an annual basis. These scorecards measure investment performance versus benchmark and peer groups over one-, three- and five-year periods; year-to-date net cash flow (changes in the accounts net assets not attributable to changes in the value of the accounts investments) and revenue growth for all accounts managed by the team. The results for overall Voya IM scorecards are typically calculated on an asset weighted performance basis of the individual team scorecards.
Investment professionals performance measures for bonus determinations are weighted by 25% being attributable to the overall Voya IM performance and 75% attributable to their specific team results (65% investment performance, 5% net cash flow and 5% revenue growth).
Voya IMs long-term incentive plan is designed to provide ownership-like incentives to reward continued employment and to link long-term compensation to the financial performance of the business. Based on job function, internal comparators and external market data, employees may be granted long-term awards. All senior investment professionals participate in the long-term compensation plan. Participants receive annual awards determined by the management committee based largely on investment performance and contribution to firm performance. Plan awards are based on the current years performance as defined by the Voya IM component of the annual incentive plan. Awards typically include a combination of performance shares which vest ratably over a three-year period, Voya restricted stock and/or a notional investment in a predefined set of Voya IM sub-advised funds, each subject to a three-year cliff-vesting schedule.
If a portfolio managers fixed base salary compensation exceeds a particular threshold, he or she may participate in Voyas deferred compensation plan. The plan provides an opportunity to invest deferred amounts of compensation in mutual funds, Voya stocks or at an annual fixed interest rate. Deferral elections are done on an annual basis and the amount of compensation deferred is irrevocable.
Ownership of Securities
The following table shows the dollar range of shares of the Trust owned by each portfolio manager as of February 28, 2014, including investments by their immediate family members and amounts invested through retirement and deferred compensation plans.
Portfolio Manager |
|
Dollar Range of Trust Shares Owned |
Daniel A. Norman |
|
Over $100,000 |
Jeffrey A. Bakalar |
|
$50,001 - $100,000 |
ADMINISTRATOR
Voya Funds Services, LLC (formerly, ING Funds Services, LLC) (Administrator or Voya Funds Services), an affiliate of the Adviser, serves as Administrator for the Trust pursuant to an administration agreement (Administration Agreement). In connection with its administration of the corporate affairs of the Trust, the Administrator bears the following expenses: the salaries and expenses of all personnel of the Trust and the Administrator except for the fees and expenses of Trustees not affiliated with the Administrator or Voya Investments; costs to prepare information; determination of daily NAV by the recordkeeping and accounting agent; expenses to maintain certain of the Trusts books and records that are not maintained by Voya Investments, the custodian, or transfer agent; costs incurred to assist in the preparation of financial information for the Trusts income tax returns, proxy statements, quarterly, semi-annual, and annual shareholder reports; costs of providing shareholder services in connection with any tender offers or to shareholders proposing to transfer their shares to a third party; providing shareholder services in connection with the dividend reinvestment plan; and all expenses incurred by the Administrator or by the Trust in connection with administering the ordinary course of the Trusts business other than those assumed by the Trust, as described below.
Except as indicated immediately above and under the section entitled Adviser, the Trust is responsible for the payment of its expenses including: the fees payable to Voya Investments; the fees payable to the Administrator; the fees and certain expenses of the Trusts custodian and transfer agent, including the cost of providing records to the Administrator in connection with its obligation of maintaining required records of the Trust; the charges and expenses of the Trusts legal counsel, legal counsel to the Trustees who are not interested persons as defined in the 1940 Act and independent accountants; commissions and any issue or transfer taxes chargeable to the Trust in connection with its transactions; all taxes and corporate fees payable by the Trust to governmental agencies; the fees of any trade association of which the Trust is a member; the costs of share certificates representing Common Shares of the Trust; organizational and offering expenses of the Trust and the fees and expenses involved in registering and maintaining registration of the Trust and its Common Shares with SEC, including the preparation and printing of the Trusts registration statement and prospectuses for such purposes; allocable communications expenses with respect to investor services, and all expenses of shareholders and Trustees meetings and of preparing, printing and mailing reports, proxy statements and prospectuses to shareholders; the cost of insurance; and litigation and indemnification expenses and extraordinary expenses not incurred in the ordinary course of the Trusts business.
For its services, the Administrator is entitled to receive from the Trust a fee at an annual rate of 0.25% of the Trusts Managed Assets.
Administrative fees paid by the Trust for the fiscal years ended February 28, 2014, February 28, 2013, and February 29, 2012, were $3,201,622, $3,026,618, and $2,977,255, respectively, for services rendered to the Trust.
DISTRIBUTOR
Shares of the Trust are distributed by Voya Investments Distributor. Pursuant to an Amended and Restated Distribution Agreement (Distribution Agreement), the Distributor, an affiliate of Voya Investments and Voya Funds Services, is the principal underwriter and distributor for the shares of the Trust and acts as agent of the Trust in the continuous offering of its shares. The Distributor bears all of its expenses of providing services pursuant to the Distribution Agreement. The Trust pays the cost for the prospectus and shareholder reports to be set in type and printed for existing shareholders and the Trust pays for the printing and distribution of copies thereof used in connection with the offering of shares to prospective investors. The Trust also pays for supplementary sales literature and advertising costs.
The Distribution Agreement continues in effect from year to year so long as such continuance is approved at least annually by a vote of the Board, including the Trustees who are not interested persons of the Trust and who have no direct or indirect financial interest in the Distribution Agreement. The Distribution Agreement automatically terminates in the event of its assignment and may be terminated at any time without penalty by the Trust or by the
Distributor upon sixty (60) days written notice. Termination by the Trust may be by vote of a majority of the Board, and a majority of the Trustees who are not interested persons of the Trust and who have no direct or indirect financial interest in the Distribution Agreement, or a majority of the outstanding voting securities of the Trust, as defined under the 1940 Act.
The Common Shares will only be sold on such days as shall be agreed to by the Trust and Voya Investments Distributor. The Common Shares will be sold at market prices, which shall be determined with reference to trades on the NYSE, subject to a minimum price to be established each day by the Trust. The minimum price on any day will not be less than the current NAV per Common Share. The Trust and Voya Investments Distributor will suspend the sale of Common Shares if the per share price of the Common Shares is less than the minimum price.
Settlements of sales of Common Shares will occur on the third business day following the date on which any such sales are made. Unless otherwise indicated in a further prospectus supplement, Voya Investments Distributor as underwriter will act as underwriter on a reasonable efforts basis.
In connection with the sale of the Common Shares on behalf of the Trust, Voya Investments Distributor may be deemed to be an underwriter within the meaning of the 1940 Act. As described below, Voya Investments Distributor also serves as distributor for the Trust in connection with the sale of Common Shares of the Trust pursuant to privately negotiated transactions and pursuant to optional cash investments. In addition, Voya Investments Distributor provides administrative services in connection with a separate at-the-market offering of Common Shares of the Trust. The offering of Common Shares pursuant to the Distribution Agreement will terminate upon the earlier of: (i) the sale of all Common Shares subject thereto; or (ii) termination of the Distribution Agreement.
EXPENSES
The Trusts assets may decrease or increase within the Trusts fiscal year, and the Trusts operating expense ratios may correspondingly increase or decrease.
In addition to the management fee and other fees described previously, the Trust pays other expenses, such as legal, audit, transfer agency and custodian out-of-pocket fees, proxy solicitation costs, and the compensation of Trustees who are not affiliated with the Adviser.
SHAREHOLDER REINVESTMENT PROGRAM
The Trust maintains a Shareholder Reinvestment Program (Program), which allows participating shareholders to reinvest all dividends and capital gain distributions (Dividends) in additional Common Shares of the Trust. The Program also allows participants to purchase additional Common Shares through optional cash investments in amounts ranging from a minimum of $100 to a maximum of $100,000 per month. Common Shares may be issued by the Trust under the Program only if the Trusts Common Shares are trading at a premium to NAV. If the Trusts Common Shares are trading at a discount to NAV, Common Shares purchased under the Program will be purchased on the open market.
If the market price (the volume-weighted average sales price, per share, as reported on the New York Stock Exchange Composite Transaction Tape as shown daily on Bloombergs AQR screen) plus estimated commissions for Common Shares of the Trust is less than the NAV on the Valuation Date (defined below), BNY Mellon Investment Servicing (U.S.) Inc. (Transfer Agent) will purchase Common Shares on the open market through a bank or securities broker as provided herein. Open market purchases may be effected on any securities exchange on which Common Shares of the Trust trade or in the over-the-counter market. If the Market Price, plus estimated commissions, exceeds the NAV before the Transfer Agent has completed its purchases, the Transfer Agent will use reasonable efforts to cease purchasing Common Shares, and the Trust shall issue the remaining Common Shares. If the Market Price, plus estimated commissions, is equal to or exceeds the NAV on the Valuation Date, the Trust will issue the Common Shares to be acquired by the Program. The Valuation Date is a date preceding the DRIP Investment Date and OCI Investment Date, on which it is determined, based on the Market Price and NAV of Common Shares of the Trust,
whether the Transfer Agent will purchase Common Shares on the open market or the Trust will issue the Common Shares for the Program. The Trust may, without prior notice to participants, determine that it will not issue new Common Shares for purchase pursuant to the Program, even when the Market Price plus estimated commissions equals or exceeds NAV, in which case the Transfer Agent will purchase Common Shares on the open market.
Common Shares issued by the Trust under the Program will be issued without incurring a fee. Common Shares purchased for the Program directly from the Trust in connection with the reinvestment of Dividends will be acquired on the DRIP Investment Date at the greater of: (i) NAV at the close of business on the Valuation Date; or (ii) the average of the daily Market Price of the shares during the DRIP Pricing Period, minus a discount of 5%. The DRIP Pricing Period for a dividend reinvestment is the Valuation Date and the prior Trading Day. A Trading Day means any day on which trades of the Common Shares of the Trust are reported on the NYSE.
Common Shares purchased directly from the Trust pursuant to optional cash investments will be acquired on an OCI Investment Date at the greater of: (i) NAV at the close of business on the Valuation Date; or (ii) the average of the daily Market Price of the shares during the OCI Pricing Period minus a discount, determined at the sole discretion of the Trust and announced in advance, ranging from 0% to 5%. The OCI Pricing Period for an OCI Investment Date means the period beginning four Trading Days prior to the Valuation Date through and including the Valuation Date. The discount for optional cash investments is set by the Trust and may be changed or eliminated by the Trust without prior notice to participants at any time. The discount for optional cash investments is determined on the last business day of each month. In all instances, however, the discount on Common Shares issued directly by the Trust shall not exceed 5% of the market price, and Common Shares may not be issued at a price less than NAV without prior specific approval of shareholders or of the Commission. Optional cash investments received by the Transfer Agent no later than 4:00 p.m. Eastern time on the OCI payment Due Date to be invested on the relevant OCI Investment Date.
Subject to the availability of Common Shares registered for issuance under the Program, there is no total maximum number of Common Shares that can be issued pursuant to the Program.
See Federal Taxation - Distributions for a discussion of the federal income tax ramifications of obtaining Common Shares under the Program.
Privately Negotiated Transactions
The Common Shares may also be offered pursuant to privately negotiated transactions between the Trust and specific investors. The terms of such privately negotiated transactions will be subject to the discretion of the management of the Trust. In determining whether to sell Common Shares pursuant to a privately negotiated transaction, the Trust will consider relevant factors including, but not limited to, the attractiveness of obtaining additional funds through the sale of Common Shares, the purchase price to apply to any such sale of Common Shares and the person seeking to purchase the Common Shares.
Common Shares issued by the Trust in connection with privately negotiated transactions will be issued at the greater of: (i) NAV per Common Share of the Trusts Common Shares; or (ii) at a discount ranging from 0% to 5% of the average of the daily market price of the Trusts Common Shares at the close of business on the two business days preceding the date upon which Common Shares are sold pursuant to the privately negotiated transaction. The discount to apply to such privately negotiated transactions will be determined by the Trust with regard to each specific transaction. The Trust will not pay any commissions with regard to privately negotiated transactions, but an investor may be subject to a front end sales load of up to 3% paid to or retained by a third party broker-dealer through which such transaction may be effected.
PORTFOLIO TRANSACTIONS
The Trust will generally have at least 80% of its net assets (plus borrowings for investment purposes) invested in Senior Loans. The remaining assets of the Trust will generally consist of loans to borrowers organized or located in countries outside the United States and outside U.S. territories and possessions or Canada, loans denominated in currencies other than the U.S. dollar, short-term debt instruments with remaining maturities of 120 days or less, longer-term debt securities, certain other instruments such as unsecured loans, subordinated loans up to a maximum of 5% of the Trusts net assets, interest rate swaps, caps and floors, repurchase agreements, reverse repurchase agreements, and equity securities acquired in connection with investments in loans. The Trust will acquire Senior Loans from and sell Senior Loans to commercial and investment banks, insurance companies, finance companies, and other investment companies and private investment funds. The Trusts interest in a particular Senior Loan will terminate when the Trust receives full payment on the loan or sells a Senior Loan in the secondary market. Costs associated with purchasing or selling investments in the secondary market include processing fees paid to agents. These costs are allocated between the purchaser and seller as agreed between the parties.
The Adviser or Sub-Adviser for the Trust places orders for the purchase and sale of investment securities for the Trust, pursuant to authority granted in the relevant Investment Advisory Agreement or Sub-Advisory Agreement. Subject to policies and procedures approved by the Trusts Board, the Adviser, or Sub-Adviser has discretion to make decisions relating to placing these orders, including, where applicable, selecting the brokers or dealers that will execute the purchase and sale of investment securities, negotiating the commission or other compensation paid to the broker or dealer executing the trade, or using an electronic trading network (ECN) or alternative trading system (ATS).
In a situation where the Sub-Adviser resigns or the Adviser otherwise assumes day to day management of the Trust pursuant to its Investment Advisory Agreement with the Trust, the Adviser will perform the services described herein as being performed by the Sub-Adviser.
How Securities Transactions are Effected
Purchases and sales of securities on a securities exchange (which include most equity securities) are effected through brokers who charge a commission for their services. In transactions on securities exchanges in the United States, these commissions are negotiated, while on many foreign securities exchanges commissions are fixed. Securities traded in the over-the-counter markets (such as debt instruments and some equity securities) are generally traded on a net basis with market makers acting as dealers; in these transactions, the dealers act as principal for their own accounts without a stated commission, although the price of the security usually includes a profit to the dealer. Transactions in certain over-the-counter securities also may be effected on an agency basis when, in the Advisers or Sub-Advisers opinion, the total price paid (including commission) is equal to or better than the best total price available from a market maker. In underwritten offerings, securities are usually purchased at a fixed price, which includes an amount of compensation to the underwriter, generally referred to as the underwriters concession or discount. On occasion, certain money market instruments may be purchased directly from an issuer, in which case no commissions or discounts are paid. The Adviser or Sub-Adviser may also place trades using an ECN or ATS.
How the Adviser or Sub-Adviser Selects Broker-Dealers
The Adviser or Sub-Adviser has a duty to seek to obtain best execution of the Trusts orders, taking into consideration a full range of factors designed to produce the most favorable overall terms reasonably available under the circumstances. In selecting brokers and dealers to execute trades, the Adviser or Sub-Adviser may consider both the characteristics of the trade and the full range and quality of the brokerage services available from eligible broker-dealers. This consideration often involves qualitative as well as quantitative judgments. Factors relevant to the nature of the trade may include, among others, price (including the applicable brokerage commission or dollar spread), the size of the order, the nature and characteristics (including liquidity) of the market for the security, the difficulty of execution, the timing of the order, potential market impact, and the need for confidentiality, speed, and certainty of execution. Factors relevant to the range and quality of brokerage services available from eligible brokers and dealers
may include, among others, the firms execution, clearance, settlement, and other operational facilities; willingness and ability to commit capital or take risk in positioning a block of securities, where necessary; special expertise in particular securities or markets; ability to provide liquidity, speed, and anonymity; the nature and quality of other brokerage and research services provided to the Adviser or Sub-Adviser (consistent with the safe harbor described below); and the firms general reputation, financial condition and responsiveness to the Adviser or Sub-Adviser, as demonstrated in the particular transaction or other transactions. Subject to its duty to seek best execution of the Trusts orders, the Adviser or Sub-Adviser may select broker-dealers that participate in commission recapture programs that have been established for the benefit of the Trust. Under these programs, the participating broker-dealers will return to the Trust (in the form of a credit to the Trust) a portion of the brokerage commissions paid to the broker-dealers by the Trust. These credits are used to pay certain expenses of the Trust. These commission recapture payments benefit the Trust, and not the Adviser or Sub-Adviser.
The Safe Harbor for Soft Dollar Practices
In selecting broker-dealers to execute a trade for the Trust, the Adviser or Sub-Adviser may consider the nature and quality of brokerage and research services provided to the Adviser or Sub-Adviser as a factor in evaluating the most favorable overall terms reasonably available under the circumstances . As permitted by Section 28(e) of the Securities Exchange Act of 1934, as amended, the Adviser or Sub-Adviser may cause the Trust to pay a broker-dealer a commission for effecting a securities transaction for the Trust that is in excess of the commission which another broker-dealer would have charged for effecting the transaction, if the Adviser or Sub-Adviser makes a good faith determination that the brokers commission paid by the Trust is reasonable in relation to the value of the brokerage and research services provided by the broker-dealer, viewed in terms of either the particular transaction or the Advisers or Sub-Advisers overall responsibilities to the Trust and its other investment advisory clients. The practice of using a portion of the Trusts commission dollars to pay for brokerage and research services provided to the Sub-Adviser is sometimes referred to as soft dollars. Section 28(e) is sometimes referred to as a safe harbor, because it permits this practice, subject to a number of restrictions, including the Advisers or Sub-Advisers compliance with certain procedural requirements and limitations on the type of brokerage and research services that qualify for the safe harbor.
Brokerage and Research Products and Services Under the Safe Harbor Research products and services may include, but are not limited to, general economic, political, business and market information and reviews, industry and company information and reviews, evaluations of securities and recommendations as to the purchase and sale of securities, financial data on a company or companies, performance and risk measuring services and analysis, stock price quotation services, computerized historical financial databases and related software, credit rating services, analysis of corporate responsibility issues, brokerage analysts earning estimates, computerized links to current market data, software dedicated to research, and portfolio modeling. Research services may be provided in the form of reports, computer-generated data feeds and other services, telephone contacts, and personal meetings with securities analysts, as well as in the form of meetings arranged with corporate officers and industry spokespersons, economists, academics, and governmental representatives.
Brokerage products and services assist in the execution, clearance and settlement of securities transactions, as well as functions incidental thereto, including but not limited to related communication and connectivity services and equipment, software related to order routing, market access, algorithmic trading, and other trading activities. On occasion, a broker-dealer may furnish the Adviser or Sub-Adviser with a service that has a mixed use (that is, the service is used both for brokerage and research activities that are within the safe harbor and for other activities). In this case, the Adviser or Sub-Adviser is required to reasonably allocate the cost of the service, so that any portion of the service that does not qualify for the safe harbor is paid for by the Adviser or Sub-Adviser from its own funds, and not by portfolio commissions paid by the Trust.
Benefits to the Adviser or Sub-Adviser - Research products and services provided to the Adviser or Sub-Adviser by broker-dealers that effect securities transactions for the Trust may be used by the Adviser or Sub-Adviser in servicing all of its accounts. Accordingly, not all of these services may be used by the Adviser or Sub-Adviser in connection with the Trust. Some of these products and services are also available to the Adviser or Sub-Adviser for cash, and
some do not have an explicit cost or determinable value. The research received does not reduce the advisory fees paid to the Adviser or sub-advisory fees payable to the Sub-Adviser for services provided to the Trust. The Advisers or Sub-Advisers expenses would likely increase if the Adviser or Sub-Adviser had to generate these research products and services through its own efforts, or if it paid for these products or services itself.
Broker-Dealers that are Affiliated with the Adviser or the Sub-Adviser
Portfolio transactions may be executed by brokers affiliated with Voya Financial, Inc., the Adviser, or the Sub-Adviser, so long as the commission paid to the affiliated broker is reasonable and fair compared to the commission that would be charged by an unaffiliated broker in a comparable transaction.
Prohibition on Use of Brokerage Commissions for Sales or Promotional Activities
The placement of portfolio brokerage with broker-dealers who have sold shares of the Trust is subject to rules adopted by the SEC and the Financial Industry Regulatory Authority (FINRA). Under these rules, the Sub-Adviser may not consider a brokers promotional or sales efforts on behalf of the Trust when selecting a broker-dealer for Trust portfolio transactions, and neither the Trust nor the Sub-Adviser may enter into an agreement under which the Trust directs brokerage transactions (or revenue generated from such transactions) to a broker-dealer to pay for distribution of Trust shares. The Trust has adopted policies and procedures, approved by the Board, that are designed to attain compliance with these prohibitions.
Principal Trades and Research
Purchases of securities for the Trust also may be made directly from issuers or from underwriters. Purchase and sale transactions may be effected through dealers which specialize in the types of securities which the Trust will be holding. Dealers and underwriters usually act as principals for their own account. Purchases from underwriters will include a concession paid by the issuer to the underwriter and purchases from dealers will include the spread between the bid and the asked price. If the execution and price offered by more than one dealer or underwriter are comparable, the order may be allocated to a dealer or underwriter which has provided such research or other services as mentioned above.
More Information about trading in Debt Instruments
Purchases and sales of debt instruments will usually be principal transactions. Such securities often will be purchased or sold from or to dealers serving as market makers for the securities at a net price. The Trust may also purchase such securities in underwritten offerings and will, on occasion, purchase securities directly from the issuer. Generally, debt instruments are traded on a net basis and do not involve brokerage commissions. The cost of executing debt instruments transactions consists primarily of dealer spreads and underwriting commissions.
In purchasing and selling debt instruments, it is the policy of the Trust to obtain the best results, while taking into account the dealers general execution and operational facilities, the type of transaction involved and other factors, such as the dealers risk in positioning the securities involved. While the Sub-Adviser generally seeks reasonably competitive spreads or commissions, the Trust will not necessarily pay the lowest spread or commission available.
Transition Management
Changes in the Sub-Adviser, investment personnel, reorganizations or a merger of the Trust may result in the sale of a significant portion or even all of the Trusts portfolio securities. This type of change generally will increase trading costs and the portfolio turnover for the Trust. The Trust, the Adviser, or the Sub-Adviser may engage a broker-dealer to provide transition management services in connection with a change in the Sub-Adviser, a reorganization, or other changes.
Allocation of Trades
Some securities considered for investment by the Trust may also be appropriate for other clients served by the Trusts Sub-Adviser. If the purchase or sale of securities consistent with the investment policies of the Trust and one or more of these other clients is considered at or about the same time, transactions in such securities will be placed on an aggregate basis and allocated among the Trust and such other clients in a manner deemed fair and equitable, over time, by the Sub-Adviser and consistent with the Sub-Advisers written policies and procedures. The Sub-Adviser may use different methods of allocating the results aggregated trades. The Sub-Advisers relevant policies and procedures and the results of aggregated trades in which the Trust participated are subject to periodic review by the Board. To the extent the Trust seeks to acquire (or dispose of) the same security at the same time, the Trust may not be able to acquire (or dispose of) as large a position in such security as it desires, or it may have to pay a higher (or receive a lower) price for such security. It is recognized that in some cases, this system could have a detrimental effect on the price or value of the security insofar as the Trust is concerned. However, over time, the Trusts ability to participate in aggregate trades is expected to provide better execution for the Trust.
Cross-Transactions
The Board has adopted a policy allowing trades to be made between affiliated registered investment companies or series thereof provided they meet the condition of Rule 17a-7 under the 1940 Act and conditions of the policy.
Brokerage Commissions Paid
No brokerage commissions were paid by the Trust for the fiscal years ended February 28, 2014, February 28, 2013, and February 29, 2012.
PORTFOLIO TURNOVER RATE
A change in securities held in the portfolio of the Trust is known as portfolio turnover and may involve the payment by the Trust of dealer mark-ups or brokerage or underwriting commissions and other transaction costs on the sale of securities, as well as on the reinvestment of the proceeds in other securities. Portfolio turnover rate for a fiscal year is the percentage determined by dividing the lesser of the cost of purchases or proceeds from sales of portfolio securities by average of the value of portfolio securities during such year, all excluding securities whose maturities at acquisition were one year or less. The Trust cannot accurately predict its turnover rate; however, the rate will be higher when the Trust finds it necessary to significantly change its portfolio to adopt a temporary defensive position or respond to economic or market events. A high turnover rate would increase expenses and may involve realization of capital gains by the Trust. The Trusts historical turnover rates are included in the Financial Highlights table in the Prospectuses.
The annual rate of the Trusts total portfolio turnover for the fiscal years ended February 28, 2014, and February 28, 2013 was 96% and 93%, respectively. The annual turnover rate of the Trust is generally expected to be between 50% and 100%, although as part of its investment policies, the Trust places no restrictions on portfolio turnover and the Trust may sell any portfolio security without regard to the period of time it has been held. The annual turnover rate of the Trust also includes Senior Loans on which the Trust has received full or partial payment. The Adviser believes that full and partial payments on loans generally comprise approximately 25% to 75% of the Trusts total portfolio turnover each year.
NET ASSET VALUE
The NAV per Common Share of the Trust is determined each business day as of the close of regular trading on the NYSE (usually 4:00 p.m. Eastern time unless otherwise designated by the NYSE). The Trust is open for business every day the NYSE is open. As of the date of this SAI, the NYSE is closed on the following holidays: New Years Day, Martin Luther King, Jr. Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. The NAV per Common Share is determined by dividing the value of the
Trusts loan assets plus all cash and other assets (including interest accrued but not collected) less all liabilities (including accrued expenses but excluding capital and surplus) by the number of Common Shares outstanding. The NAV per Common Share is made available for publication.
FEDERAL TAXATION
The following is only a summary of certain U.S. federal income tax considerations generally affecting the Trust and its shareholders. No attempt is made to present a detailed explanation of the tax treatment of the Trust or its shareholders, and the following discussion is not intended as a substitute for careful tax planning. Shareholders should consult with their own tax advisers regarding the specific federal, state, local, foreign, and other tax consequences of investing in the Trust.
Cost Basis Reporting
Effective January 1, 2012, the Internal Revenue Service requires mutual fund companies and brokers to report on Form 1099-B the cost basis on the sale or exchange of Trust shares acquired on or after January 1, 2012 (covered shares). If you acquire and hold shares directly through the Trust and not through a financial intermediary, the Trust will use an average cost single category (ACSC) methodology for tracking and reporting your cost basis on covered shares, unless you request, in writing, another cost basis reporting methodology.
The available methods for reporting your cost basis include those set out in the chart below:
ACSC |
|
Shares are depleted on a first-in, first-out basis with the cost basis calculated by multiplying the shares redeemed by the average cost per share on all shares purchased on or after January 1, 2012. |
FIFO (First In, First Out) |
|
Oldest shares purchased are redeemed first. |
LIFO (Last In, First Out) |
|
Most recent shares purchased are redeemed first. |
HIFO (Highest Cost In, First Out) |
|
Shares with highest cost basis are redeemed first. |
LOFO (Lowest Cost In First Out) |
|
Shares with lowest cost basis are redeemed first. |
HILT (Highest Cost Long Term In, First Out) |
|
Will redeem the long-term highest cost available shares first. |
HIST (Highest Cost Short Term In, First Out) |
|
Will redeem the short-term highest cost available shares first. |
LILT (Lowest Cost Long Term In, First Out) |
|
Will redeem the long-term lowest cost available shares first. |
LIST (Lowest Cost Short Term In, First Out) |
|
Will redeem the short-term lowest cost available shares first. |
Specific Lot Depletion |
|
The shares sold are specifically identified by you at the time of redemption. |
You may elect which method you want to use by notifying the Trust in writing. This election may be revoked or changed by you at any time up to the date of your first redemption of covered shares. If you do not affirmatively elect a cost basis method then the Trusts default cost basis calculation method, which is currently the ACSC method, will be applied to your account(s). The default method will also be applied to all new accounts established unless otherwise requested by you.
If you acquire and hold shares through a financial intermediary, please contact your financial intermediary for information related to cost basis defaults, cost basis selection, and cost basis reporting.
It is important for you to consult with your own tax advisor when selecting which cost basis tracking and relief methodology is in your best interest.
Qualification as a Regulated Investment Company
The Trust has elected (or will elect) and intends to qualify each year to be taxed as a regulated investment company (RIC) under Subchapter M of the Internal Revenue Code of 1986, as amended (Code). As a RIC, the Trust generally will not be subject to federal income tax on the portion of its investment company taxable income ( i.e. , taxable interest, dividends and other taxable ordinary income, net of expenses, and net short-term capital gains in excess of long-term capital losses) and net capital gain ( i.e. , the excess of net long-term capital gains over the sum of net short-term capital losses and capital loss carryovers from prior years) that it distributes to shareholders, provided that it distributes at least 90% of its investment company taxable income for the taxable year (Distribution Requirement), and satisfies certain other requirements of the Code that are described below.
In addition to satisfying the Distribution Requirement and an asset diversification requirement discussed below, a RIC must derive at least 90% of its gross income for each taxable year from dividends, interest, certain payments with respect to securities loans, gains from the sale or other disposition of stock or securities or foreign currencies, net income derived from an interest in a qualified publicly traded partnership and other income (including, but not limited to, gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies.
In addition to satisfying the requirements described above, the Trust must satisfy an asset diversification test in order to qualify as a RIC. Under this test, at the close of each quarter of the Trusts taxable year, at least 50% of the value of the Trusts assets must consist of cash and cash items (including receivables), U.S. government securities, securities of other RICs, and securities of other issuers (as to which the Trust has not invested more than 5% of the value of the Trusts total assets in securities of any such issuer and as to which the Trust does not hold more than 10% of the outstanding voting securities of any such issuer), and no more than 25% of the value of its total assets may be invested in the securities of any one issuer (other than U.S. government securities and securities of other RICs), in two or more issuers which the Trust controls and which are engaged in the same or similar trades or businesses, or of one or more qualified publicly-traded partnerships.
In general, gain or loss recognized by the Trust on the disposition of an asset will be a capital gain or loss. However, gain recognized on the disposition of a debt obligation purchased by the Trust at a market discount (generally at a price less than its principal amount other than at the original issue) will generally be treated as ordinary income to the extent of the portion of the market discount which accrued during the period of time the Trust held the debt obligation.
In general, investments by the Trust in zero-coupon or other securities issued with original issue discount will result in income to the Trust equal to a portion of the excess of the face value of the securities over their issue price (original issue discount) each year that the Trust holds the securities, even if the Trust receives no cash interest payments. This income will be included in determining the amount of income which the Trust must distribute to maintain its status as a RIC and to avoid federal income and excise taxes.
If for any taxable year the Trust does not qualify as a RIC, all of its taxable income (including its net capital gain) will be subject to tax at regular corporate rates without any deduction for distributions to shareholders, and such distributions will be taxable as ordinary dividends to the extent of the Trusts current and accumulated earnings and profits. Such distributions generally would be eligible for the dividends-received deduction in the case of corporate shareholders and for treatment as qualified dividend income in the case of individual shareholders.
If the Trust fails to qualify as a RIC in any year, it must pay out its earnings and profits accumulated in that year in order to qualify again as a RIC. Moreover, if the Trust failed to qualify as a RIC for a period greater than one taxable year, the Trust may be required to recognize any net built-in gains with respect to certain of its assets (the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized if the Trust had been liquidated) in order to qualify as a RIC in a subsequent year.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a RIC that fails to distribute in each calendar year an amount at least equal to the sum of 98% of its ordinary taxable income (taking into account certain deferrals and elections) for the calendar year 98.2% of its capital gain net income ( i.e. , capital gains in excess of capital losses) for the one-year period ended on October 31 of such calendar year; and any ordinary taxable income and capital gain net income for previous years that was not distributed or taxed to the RIC during those years.
The Trust intends to make sufficient distributions or deemed distributions (discussed below) of its ordinary taxable income and capital gain net income to avoid liability for the excise tax.
Hedging Transactions
The Trust has the ability, pursuant to its investment objective and policies, to hedge its investments in a variety of transactions, including interest rate swaps and the purchase or sale of interest rate caps and floors. The treatment of these transactions for federal income tax purposes may in some instances be unclear, and the RIC qualification requirements may limit the extent to which the Trust can engage in hedging transactions.
Under certain circumstances, the Trust may recognize gain from a constructive sale of an appreciated financial position. If the Trust enters into certain transactions in property while holding substantially identical property, the Trust would be treated as if it had sold and immediately repurchased the property and would be taxed on any gain (but not loss) from the constructive sale. The character of gain from a constructive sale would depend upon the Trusts holding period in the property. Loss from a constructive sale would be recognized when the property was subsequently disposed of, and its character would depend on the Trusts holding period and the application of various loss deferral provisions in the Code. Constructive sale treatment does not apply to transactions closed in the 90-day period ending with the 30th day after the close of the taxable year, if certain conditions are met.
Capital Loss Carryforwards
Capital loss carryforwards were the following as of February 28, 2014:
Fund |
|
Amount |
|
Expiration Dates |
|
|
Prime Rate |
|
$ |
(41,585,301 |
) |
2017 |
|
|
|
(125,812,939 |
) |
2018 |
|
|
|
|
(24,760,715 |
) |
2019 |
|
|
|
|
(14,509,554 |
) |
None |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(206,668,509 |
) |
|
|
Distributions
The Trust anticipates distributing all or substantially all of its investment company taxable income for the taxable year. Such distributions will be taxable to shareholders as ordinary income. If a portion of the Trusts income consists of dividends paid by U.S. corporations, a portion of the dividends paid by the Trust may be eligible for the corporate dividends received deduction.
The Trust may either retain or distribute to shareholders its net capital gain for each taxable year. The Trust currently intends to distribute any such amounts. If net capital gain is distributed and designated as a capital gain dividend, it will generally be taxable to individual shareholders at a maximum federal rate of either 15% or 20% (depending on whether the individuals income exceeds certain threshold amounts). Distributions are subject to these capital gains rates regardless of the length of time the shareholder has held his shares. Conversely, if the Trust elects to retain its net capital gain, the Trust will be taxed thereon (except to the extent of any available capital loss carryovers) at the applicable corporate tax rate. In such event, it is expected that the Trust also will elect to treat such gain as having been distributed to shareholders. As a result, each shareholder will be required to report his pro rata share of such
gain on his tax return as long-term capital gain, will be entitled to claim a tax credit for his pro rata share of tax paid by the Trust on the gain, and will increase the tax basis for his shares by an amount equal to the deemed distribution less the tax credit.
The maximum individual rate applicable to qualifying dividend income and long-term capital gains is generally either 15% or 20%, depending on whether the individuals income exceeds certain threshold amounts. The rate reductions do not apply to corporate taxpayers. The Trust will be able to separately report distributions of any qualifying long-term capital gains or qualifying dividends earned by the Trust that would be eligible for the lower maximum rate, although it does not expect to distribute a material amount of qualifying dividends. A shareholder would also have to satisfy more than a 60-day holding period with respect to any distributions of qualifying dividend in order to obtain the benefit of the lower rate. Distributions from funds, such as the Trust, investing in debt instruments will not generally qualify for the lower rate.
Distributions by the Trust in excess of the Trusts earnings and profits will be treated as a return of capital to the extent of (and in reduction of) the shareholders tax basis in his shares; any such return of capital distributions in excess of the shareholders tax basis will be treated as gain from the sale of his shares, as discussed below.
Distributions by the Trust will be treated in the manner described above regardless of whether such distributions are paid in cash or reinvested in additional shares of the Trust. If the NAV at the time a shareholder purchases shares of the Trust reflects undistributed income or gain, distributions of such amounts will be taxable to the shareholder in the manner described above, even though such distributions economically constitute a return of capital to the shareholder.
A distribution will be treated as paid on December 31 of the current calendar year if it is declared by the Trust in October, November, or December with a record date in such a month and paid by the Trust during January of the following calendar year. Such distributions will be taxed to shareholders in the calendar year in which the distributions are declared, rather than the calendar year in which the distributions are received.
The Trust will be required in certain cases to withhold and remit to the U.S. Treasury at the current rate of 28% of all dividends and redemption proceeds payable to any shareholder if: (1) the shareholder fails to provide the Trust with a certified, correct identification number or other required certifications; (2) the IRS notifies the Trust that the taxpayer identification number furnished by the shareholder is incorrect; (3) the IRS notifies the Trust that the shareholder failed to report properly certain interest and dividend income to the IRS and to respond to notices to that effect; or (4) when required to do so, the shareholder fails to certify that he or she is not subject to backup withholding. Corporate shareholders and other shareholders specified in the Code are exempt from such backup withholding. Backup withholding is not an additional tax. Any amounts withheld may be credited against the shareholders U.S. federal income tax liability if the appropriate information is provided to the IRS.
An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from the Trust and net gains from redemptions or other taxable dispositions of Trust shares) of US individuals, estates and trusts to the extent that such persons modified adjusted gross income (in the case of an individual) or adjusted gross income (in the case of an estate or trust) exceeds certain threshold amounts.
Sale of Common Shares
A shareholder will recognize gain or loss on the sale or exchange of shares of the Trust in an amount generally equal to the difference between the proceeds of the sale and the shareholders adjusted tax basis in the shares. In general, any such gain or loss will be considered capital gain or loss if the shares are held as capital assets, and gain or loss will be long-term or short-term, depending upon the shareholders holding period for the shares. However, any capital loss arising from the sale of shares held for six months or less will be treated as a long-term capital loss to the extent of any long-term capital gains distributed (or deemed distributed) with respect to such shares. Also, any loss realized on a sale or exchange of shares will be disallowed to the extent the shares disposed of are replaced (including shares acquired through the Shareholder Reinvestment Program) within a period of 61 days beginning 30 days before and
ending 30 days after the shares are disposed of. In such case, the tax basis of the acquired shares will be adjusted to reflect the disallowed loss.
Repurchases of Shares
As noted above, the Trust may take action to repurchase its shares. If a shareholder tenders all shares of the Trust that he or she owns or is considered to own, the shareholder will realize a taxable sale or exchange (see Sale of Common Shares above). If a shareholder tenders less than all of the shares of the Trust that he or she owns or is considered to own, the repurchase may not qualify as an exchange, and the proceeds received may be treated as a dividend, return of capital or capital gain, depending on the Trusts earnings and profits and the shareholders basis in the tendered shares. If that occurs, there is a risk that non-tendering shareholders may be considered to have received a deemed distribution as a result of the Trusts purchase of tendered shares, and all or a portion of that deemed distribution may be taxable as a dividend.
Foreign Shareholders
U.S. taxation of a shareholder who, as to the United States, is a nonresident alien individual, foreign trust or estate, foreign corporation, or foreign partnership (foreign shareholder) depends, in part, on whether the shareholders income from the Trust is effectively connected with a U.S. trade or business carried on by such shareholder.
If the income from the Trust is not effectively connected with a U.S. trade or business carried on by a foreign shareholder, distributions of investment company taxable income will be subject to U.S. withholding tax at the rate of 30% (or lower treaty rate). Such a foreign shareholder would generally be exempt from U.S. federal income tax on gains realized on the sale or exchange of shares of the Trust, capital gain dividends, and amounts retained by the Trust that are designated as undistributed capital gains. However, subject to certain limitations and the receipt of further guidance from the U.S. Treasury, dividends paid to certain foreign shareholders may be exempt from U.S. tax with respect to taxable years of the Trust beginning before January 1, 2014 (or a later date if extended by the U.S. Congress) to the extent such dividends are attributable to qualified interest and/or net short-term capital gains, provided that the Trust elects to follow certain procedures. The Trust may choose to not follow such procedures and there can be no assurance as to the amount, if any, of dividends that would not be subject to withholding. There is no assurance that Congress will extend the exemption.
If the income from the Trust is effectively connected with a U.S. trade or business carried on by a foreign shareholder, then distributions of investment company taxable income, capital gain dividends, amounts retained by the Trust that are designated as undistributed capital gains and any gains realized upon the sale or exchange of shares of the Trust will be subject to U.S. federal income tax at the rates applicable to U.S. citizens or domestic corporations. Foreign shareholders that are classified as corporations for U.S. tax purposes also may be subject to a branch profits tax.
In the case of foreign non-corporate shareholders, the Trust may be required to withhold U.S. federal income tax at a rate of 28% on distributions that are otherwise exempt from withholding tax (or taxable at a reduced treaty rate) unless such shareholders furnish the Trust with proper notification of their foreign status. (See Distributions.)
The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may be different from those described herein. Foreign shareholders are urged to consult their own tax advisers with respect to the particular tax consequences to them of an investment in the Trust, including the applicability of foreign taxes.
Effective July 1, 2014, the Trust will be required to withhold U.S. taxes (at a 30% rate) on payments of dividends and (effective January 1, 2017) redemption proceeds and certain capital gain dividends made to certain non-U.S. entities that fail to comply (or be deemed compliant) with extensive new reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to the Trust to enable it to determine whether withholding is required.
Foreign shareholders may also be subject to U.S. estate tax with respect to their Trust shares.
Effect of Future Legislation; Other Tax Considerations
The foregoing general discussion of U.S. federal income tax consequences is based on the Code and the U.S. Treasury Regulations issued thereunder as in effect on the date of this SAI. Future legislative or administrative changes or court decisions may significantly change the conclusions expressed herein, and any such changes or decisions may have a retroactive effect with respect to the transactions contemplated herein.
Income received by the Trust from foreign sources may be subject to withholding and other taxes imposed by such foreign jurisdictions, absent treaty relief. Distributions to shareholders also may be subject to state, local, and foreign taxes, depending upon each shareholders particular situation. Shareholders are urged to consult their tax advisers as to the particular consequences to them of an investment in the Trust.
ADVERTISING AND PERFORMANCE DATA
Advertising
From time to time, advertisements and other sales materials for the Trust may include information concerning the historical performance of the Trust. Any such information may include trading volume of the Trusts Common Shares, the number of Senior Loan investments, annual total return, aggregate total return, distribution rate, average compounded distribution rates and yields of the Trust for specified periods of time, and diversification statistics. Such information may also include rankings, ratings and other information from independent organizations such as Lipper; Morningstar; Value Line, Inc.; CDA Technology, Inc.; S&Ps Portfolio Management Data (a division of S&P); Moodys; Bloomberg; or other industry publications. These rankings will typically compare the Trust to all closed-end funds, to other Senior Loan funds, and/or also to taxable closed-end fixed-income funds. Any such use of rankings and ratings in advertisements and sales literature will conform with the guidelines of FINRA approved by the SEC. Ranking comparisons and ratings should not be considered representative of the Trusts relative performance for any future period.
Reports and promotional literature may also contain the following information: (i) number of shareholders; (ii) average account size; (iii) identification of street and registered account holdings; (iv) lists or statistics of certain of the Trusts holdings including, but not limited to, portfolio composition, sector weightings, portfolio turnover rates, number of holdings, average market capitalization, and modern portfolio theory statistics alone or in comparison with itself (over time) and with its peers and industry group; (v) public information about the assets class; and (vi) discussions concerning coverage of the Trust by analysts.
In addition, reports and promotional literature may contain information concerning the Adviser, the Sub-Adviser, Voya Financial, Inc., the portfolio managers, the Administrator, or affiliates of the Trust including: (i) performance rankings of other funds managed by the Adviser or Sub-Adviser, or the individuals employed by the Adviser or Sub-Adviser who exercise responsibility for the day-to-day management of the Trust, including rankings and ratings of investment companies published by Lipper, Morningstar, Value Line, Inc., CDA Technologies, Inc., or other rating services, companies, publications or other persons who rank or rate investment companies or other investment products on overall performance or other criteria; (ii) lists of clients, the number of clients, or assets under management; (iii) the past performance of Voya Financial, Inc. and Voya Funds Services; (iv) the past performance of other funds managed by the Adviser or Sub-Adviser; (v) quotes from a portfolio manager of the Trust or industry specialists; and (vi) information regarding rights offerings conducted by closed-end funds managed by the Adviser or Sub-Adviser.
The Trust may compare the frequency of its reset period to the frequency which LIBOR changes. Further, the Trust may compare its yield to: (i) LIBOR; (ii) the federal funds rate; (iii) the Prime Rate, quoted daily in the Wall Street Journal as the base rate on corporate loans at large U.S. money center commercial banks; (iv) the average yield reported by the Bank Rate Monitor National Index for money market deposit accounts offered by the 100 leading banks and thrift institutions in the ten largest standard metropolitan statistical areas, (v) yield data published by Lipper, Bloomberg, or other industry sources; or (vi) the yield on an investment in 90-day Treasury bills on a rolling basis, assuming quarterly compounding. Further, the Trust may compare such other yield data described above to each other. The Trust may also compare its total return, NAV stability and yield to fixed-income investments. As with yield and total return calculations, yield comparisons should not be considered representative of the Trusts yield or relative performance for any future period.
The Trust may provide information designed to help individuals understand their investment goals and explore various financial strategies. Such information may include information about current economic, market, and political conditions; materials that describe general principles of investing, such as asset allocation, diversification, risk tolerance, and goal setting; worksheets used to project savings needs based on assumed rates of inflation and hypothetical rates of return; and action plans offering investment alternatives. Materials may also include discussion of other investment companies in the Voya family of funds, products and services, and descriptions of the benefits of working with investment professionals in selecting investments.
Performance Data
The Trust may quote annual total return and aggregate total return performance data. Total return quotations for the specified periods will be computed by finding the rate of return (based on net investment income and any capital gains or losses on portfolio investments over such periods) that would equate the initial amount invested to the value of such investment at the end of the period. On occasion, the Trust may quote total return calculations published by Lipper, a widely recognized independent publication that monitors the performance of both open-end and closed-end investment companies.
The Trusts distribution rate is calculated on a monthly basis by annualizing the dividend declared in the month and dividing the resulting annualized dividend amount by the Trusts corresponding month-end NAV (in the case of NAV) or the last reported market price (in the case of Market). The distribution rate is based solely on the actual dividends and distributions, which are made at the discretion of management. The distribution rate may or may not include all investment income, and ordinarily will not include capital gains or losses, if any.
Total return and distribution rate and compounded distribution rate figures utilized by the Trust are based on historical performance and are not intended to indicate future performance. Distribution rate, compounded distribution rate and NAV per share can be expected to fluctuate over time. Total return will vary depending on market conditions, the Senior Loans, and other securities comprising the Trusts portfolio, the Trusts operating expenses and the amount of net realized and unrealized capital gains or losses during the period.
GENERAL INFORMATION
Custodian
State Street Bank and Trust Company, 801 Pennsylvania Avenue, Kansas City, Missouri 64105 has been retained to act as the custodian for the Trust. State Street Bank and Trust Company does not have any part in determining the investment policies of the Trust or in determining which portfolio securities are to be purchased or sold by the Trust or in the declaration of dividends and distributions.
Legal Counsel
Legal matters for the Trust are passed upon by Dechert LLP, 1900 K Street, NW, Washington, DC 20006.
Independent Registered Public Accounting Firm
KPMG LLP serves as the independent registered public accounting firm for the Trust. KPMG LLP provides audit services, tax return preparation and assistance and consultation in connection with review of SEC filings. KPMG LLP is located at Two Financial Center, 60 South Street, Boston, Massachusetts 02111.
FINANCIAL STATEMENTS
The financial statements and the independent registered public accounting firms report thereon, appearing in the Trusts annual shareholder report for the year ended February 28, 2014 are incorporated by reference in this SAI. The Trusts annual and semi-annual (unaudited) shareholder reports are available at 7337 East Doubletree Ranch Road, Suite 100, Scottsdale, Arizona 85258, upon request and without charge by calling (800) 992-0180.
VOYA FAMILY OF FUNDS
PROXY VOTING PROCEDURES AND GUIDELINES
Effective Date: July 10, 2003
Revision Date: May 1, 2014
Table of Contents
I. |
Introduction |
1 |
II. |
Compliance Committee |
1 |
III. |
Delegation of Voting Authority |
1 |
IV. |
Approval and Review of Procedures |
3 |
V. |
Voting Procedures and Guidelines |
3 |
VI. |
Conflicts of Interest |
7 |
VII. |
Reporting and Record Retention |
8 |
EXHIBIT 1 List of Voya funds |
9 |
|
EXHIBIT 2 Proxy Voting Procedures of the Advisers |
10 |
|
I. |
Introduction |
10 |
II. |
Roles and Responsibilities |
10 |
III. |
Voting Procedures |
14 |
IV. |
Assessment of the Agent and Conflicts of Interest |
15 |
V. |
Reporting and Record Retention |
17 |
APPENDIX 1 Proxy Group |
18 |
|
EXHIBIT 3 Proxy Voting Guidelines of the Voya funds |
19 |
|
I. |
Introduction |
19 |
II. |
Guidelines |
19 |
General Policies |
19 |
|
1. |
The Board of Directors |
20 |
2. |
Proxy Contests |
28 |
3. |
Auditors |
28 |
4. |
Proxy Contest Defenses |
28 |
5. |
Tender Offer Defenses |
29 |
6. |
Miscellaneous |
31 |
7. |
Capital Structure |
33 |
8. |
Executive and Director Compensation |
35 |
9. |
State of Incorporation |
39 |
10. |
Mergers and Corporate Restructurings |
40 |
11. |
Mutual Fund Proxies |
40 |
12. |
Social and Environmental Issues |
41 |
13. |
Global Proxies |
42 |
I. Introduction
The following are the Proxy Voting Procedures and Guidelines (the Procedures and Guidelines) of the Voya family of funds set forth on Exhibit 1 attached hereto and each portfolio or series thereof, except for any Sub-Adviser-Voted Series identified on Exhibit 1 and further described in Section III. below (each non-Sub-Adviser-Voted Series hereinafter referred to as a Fund and collectively, the Funds). The purpose of these Procedures and Guidelines is to set forth the process by which each Fund subject to these Procedures and Guidelines will vote proxies related to the equity assets in its investment portfolio (the portfolio securities). The term proxies as used herein shall include votes in connection with annual and special meetings of equity stockholders but not those regarding bankruptcy matters and/or related plans of reorganization. The Procedures and Guidelines have been approved by the Funds Boards of Trustees/Directors(1) (each a Board and collectively, the Boards), including a majority of the independent Trustees/Directors(2) of the Boards. These Procedures and Guidelines may be amended only by the Boards. The Boards shall review these Procedures and Guidelines at their discretion, and make any revisions thereto as deemed appropriate by the Boards.
II. Compliance Committee
The Boards hereby delegate to the Compliance Committee of each Board (each a Committee and collectively, the Committees) the authority and responsibility to oversee the implementation of these Procedures and Guidelines and, where applicable, to make determinations on behalf of a Board with respect to the voting of proxies on behalf of each Fund. Furthermore, the Boards hereby delegate to each Committee the authority to review and approve material changes to proxy voting procedures of any Funds investment adviser (the Adviser). The Proxy Voting Procedures of the Adviser (the Adviser Procedures) are attached hereto as Exhibit 2 . Any determination regarding the voting of proxies of each Fund that is made by a Committee, or any member thereof, as permitted herein, shall be deemed to be a good faith determination regarding the voting of proxies by the full Board. Each Committee may rely on the Adviser through the Proxy Coordinator, Agent, and/or Proxy Group (as such terms are defined in the Adviser Procedures ( Exhibit 2 , Sections II.A., B., and C., respectively)) to deal in the first instance with the application of these Procedures and Guidelines. Each Committee shall conduct itself in accordance with its charter.
III. Delegation of Voting Authority
Except as otherwise provided for herein, the Boards hereby delegate to the Adviser to each Fund the authority and responsibility to vote all proxies with respect to all portfolio securities of the
(1) Reference in these Procedures to one or more Funds shall, as applicable, mean those Funds that are under the jurisdiction of the particular Board or Compliance Committee at issue. No provision in these Procedures is intended to impose any duty upon the particular Board or Compliance Committee with respect to any other Fund.
(2) The independent Trustees/Directors are those Board members who are not interested persons of the Funds within the meaning of Section 2(a)(19) of the Investment Company Act of 1940.
Fund in accordance with the current proxy voting procedures and guidelines that have been approved by the Board. The Boards may revoke such delegation with respect to any proxy or proposal, and assume the responsibility of voting any Fund proxy or proxies as they deem appropriate. Non-material amendments to the Procedures and Guidelines may be approved for immediate implementation by the President or Chief Financial Officer of a Fund, subject to ratification at the next regularly scheduled meeting of the Compliance Committee.
A Board may elect to delegate the voting of proxies to the Sub-Adviser of a portfolio or series of the Voya funds. In so doing, the Board shall also approve the Sub-Advisers proxy policies for implementation on behalf of such portfolio or series (a Sub-Adviser-Voted Series). Sub-Adviser-Voted Series shall not be covered under these Procedures and Guidelines, except as described in Section VII.A. below with respect to vote reporting requirements, but rather shall be covered by such Sub-Advisers proxy policies, provided that the Board, including a majority of the independent Trustees/Directors(3), has approved them on behalf of such Sub-Adviser-Voted Series, and ratifies any subsequent changes at the next regularly scheduled meeting of the Compliance Committee and the Board.
When a Fund participates in the lending of its securities and the securities are on loan at record date, proxies related to such securities will not be forwarded to the Adviser by the Funds custodian and therefore will not be voted. However, the Adviser shall use best efforts to recall or restrict specific securities from loan for the purpose of facilitating a material vote as described in the Adviser Procedures.
Funds that are Funds-of-Funds will echo vote their interests in underlying mutual funds, which may include mutual funds other than the Voya funds (or portfolios or series thereof) set forth on Exhibit 1 attached hereto. This means that, if the Fund-of-Funds must vote on a proposal with respect to an underlying investment company, the Fund-of-Funds will vote its interest in that underlying fund in the same proportion all other shareholders in the underlying investment company voted their interests.
However, if the underlying fund has no other shareholders, the Fund-of-Funds will vote as follows:
A. If the Fund-of-Funds and the underlying fund are being solicited to vote on the same proposal ( e.g. , the election of fund directors/trustees), the Fund-of-Funds will vote the shares it holds in the underlying fund in the same proportion as all votes received from the holders of the Fund-of-Funds shares with respect to that proposal; and
B. If the Fund-of-Funds is being solicited to vote on a proposal for an underlying fund ( e.g. , a new Sub-Adviser to the underlying fund), and there is no corresponding proposal at the Fund-of-Funds level, the Board shall determine the most appropriate method of voting with respect to the underlying fund proposal.
(3) The independent Trustees/Directors are those Board members who are not interested persons of the Funds within the meaning of Section 2(a)(19) of the Investment Company Act of 1940.
The foregoing procedure shall also apply to any Voya fund (an Investing Fund) that, while not a Fund-of-Funds, invests in one or more underlying funds. Accordingly:
A. Each Investing Fund will echo vote its interests in an underlying fund, if the underlying fund has shareholders other than the Investing Fund;
B. In the event an underlying fund has no other shareholders, and the Investing Fund and the underlying fund are being solicited to vote on the same proposal, the Investing Fund will vote its interests in the underlying fund in the same proportion as all votes received from the holders of its own shares on that proposal; and
C. In the event an underlying fund has no other shareholders, and there is no corresponding proposal at the Investing Fund level, the Board shall determine the most appropriate method of voting with respect to the underlying fund proposal.
A fund that is a Feeder Fund in a master-feeder structure does not echo vote. Rather, it passes votes requested by the underlying master fund to its shareholders. This means that, if the Feeder Fund is solicited by the master fund, it will request instructions from its own shareholders, either directly or, in the case of an insurance-dedicated Fund, through an insurance product or retirement plan, as to the manner in which to vote its interest in an underlying master fund.
When a Voya fund is a feeder in a master-feeder structure, proxies for the portfolio securities owned by the master fund will be voted pursuant to the master funds proxy voting policies and procedures. As such, except as described in Section VII.A. below with respect to vote reporting requirements, Feeder Funds shall not be subject to these Procedures and Guidelines.
IV. Approval and Review of Procedures
Each Funds Adviser has adopted proxy voting procedures in connection with the voting of portfolio securities for the Funds as attached hereto in Exhibit 2 . The Boards hereby approve such procedures. All material changes to the Adviser Procedures must be approved by the Boards or the Compliance Committees prior to implementation; however, the President or Chief Financial Officer of a Fund may make such non-material changes as he/she deems appropriate, subject to ratification by the Boards or the Compliance Committees at their next regularly scheduled meeting.
V. Voting Procedures and Guidelines
The Guidelines that are set forth in Exhibit 3 hereto specify the manner in which the Funds generally will vote with respect to the proposals discussed therein.
Unless otherwise noted, the defined terms used hereinafter shall have the same meaning as defined in the Adviser Procedures ( Exhibit 2 ).
A. Routine Matters
The Agent shall be instructed to submit a vote in accordance with the Guidelines where such Guidelines provide a clear policy ( e.g. , For, Against, Withhold, or Abstain)
on a proposal. However, the Agent shall be directed to refer any proxy proposal to the Proxy Coordinator for instructions as if it were a matter requiring case-by-case consideration under circumstances where the application of the Guidelines is unclear, it appears to involve unusual or controversial issues, or an Investment Professional (as such term is defined in the Adviser Procedures ( Exhibit 2 , Section II.D.)) recommends a vote contrary to the Guidelines.
B. Matters Requiring Case-by-Case Consideration
The Agent shall be directed to refer proxy proposals accompanied by its written analysis and voting recommendation to the Proxy Coordinator where the Guidelines have noted case-by-case consideration.
Upon receipt of a referral from the Agent, the Proxy Coordinator may solicit additional research from the Agent, Investment Professional(s), as well as from any other source or service.
Except in cases in which the Proxy Group has previously provided the Proxy Coordinator with standing instructions to vote in accordance with the Agents recommendation, the Proxy Coordinator will forward the Agents analysis and recommendation and/or any research obtained from the Investment Professional(s), the Agent, or any other source to the Proxy Group. The Proxy Group may consult with the Agent and/or Investment Professional(s), as it deems necessary.
In the event a Proxy Group member believes he/she has a potential conflict of interest that may preclude him/her from making a vote determination in the best interests of the beneficial owners of the applicable Fund, such Proxy Group member shall so advise the Proxy Coordinator. The Proxy Group member may elect to recuse himself/herself from consideration of the relevant proxy or ask the Proxy Coordinator to solicit the opinion of Counsel (as such term is defined in the Adviser Procedures ( Exhibit 2 , Section IV.A.) on the matter, recusing himself/herself only in the event Counsel determines that a material conflict of interest (as such term is defined in Section V.B.3. below) exists with respect to the Proxy Group member. If recusal, whether voluntary or pursuant to a finding of Counsel, does not occur prior to the members participation in any Proxy Group discussion of the relevant proxy, any Out-of-Guidelines Vote determination shall be subject to the Compliance Committee referral process described in Section V.B.3. below.
The Proxy Coordinator shall use best efforts to convene the Proxy Group with respect to all matters requiring its consideration. In the event quorum requirements cannot be timely met in connection with a voting deadline, it shall be the policy of the Funds to vote in accordance with the Agents recommendation, unless the Agents recommendation is deemed to be materially conflicted as provided for under the Adviser Procedures, in which case no action shall be taken on such matter ( i.e. , a Non-Vote).
1. Within-Guidelines Votes: Votes in Accordance with a Funds Guidelines and/or, where applicable, Agent Recommendation
In the event the Proxy Group and, where applicable, any Investment Professional participating in the voting process, recommend a vote Within Guidelines, the Proxy Group will instruct the Agent, through the Proxy Coordinator, to vote in this manner, except that the Proxy Coordinator may first consult with a Funds Compliance Committee as described in Section V.B.5. below. Except as provided for herein, no Conflicts Report (as such term is defined in the Adviser Procedures ( Exhibit 2 , Section IV.B.)) is required in connection with Within-Guidelines Votes.
2. Non-Votes: Votes in Which No Action is Taken
The Proxy Group may recommend that a Fund refrain from voting under circumstances including, but not limited to, the following: (1) if the economic effect on shareholders interests or the value of the portfolio holding is indeterminable or insignificant, e.g. , proxies in connection with fractional shares, securities no longer held in the portfolio of a Voya fund or proxies being considered on behalf of a Fund that is no longer in existence; or (2) if the cost of voting a proxy outweighs the benefits, e.g. , certain international proxies, particularly in cases in which share blocking practices may impose trading restrictions on the relevant portfolio security. In such instances, the Proxy Group may instruct the Agent, through the Proxy Coordinator, not to vote such proxy. The Proxy Group may provide the Proxy Coordinator with standing instructions on parameters that would dictate a Non-Vote without the Proxy Groups review of a specific proxy.
Reasonable efforts shall be made to secure and vote all other proxies for the Funds, but, particularly in markets in which shareholders rights are limited, Non-Votes may also occur in connection with a Funds related inability to timely access ballots or other proxy information in connection with its portfolio securities.
Non-Votes may also result in certain cases in which the Agents recommendation has been deemed to be conflicted, as described in Sections V.B. above and V.B.4. below.
3. Out-of-Guidelines Votes: Votes Contrary to Procedures and Guidelines, or Agent Recommendation; where applicable, Where No Recommendation is Provided by Agent; or Where Agents Recommendation is Conflicted
If the Proxy Group recommends that a Fund vote contrary to the Guidelines, or the recommendation of the Agent, where applicable; if the Agent has made no recommendation on a matter and the Procedures and Guidelines are silent; or the Agents recommendation on a matter is deemed to be materially conflicted as provided for under the Adviser Procedures, the Proxy Coordinator will then request that all members of the Proxy Group participating in the voting process and each Investment Professional participating in the voting process complete a Conflicts Report.
As provided for in the Adviser Procedures, the Proxy Coordinator shall be responsible for identifying to Counsel potential conflicts of interest with respect to the Agent, the Advisers, the Funds principal underwriters (Underwriters), or an affiliated person (as such term is defined in Section 2(a)(3) of the Investment Company Act of 1940) of the Funds, their investment advisers, or principal underwriters (hereinafter, Affiliate). Such potential conflicts of interest are identified by the Proxy Coordinator based upon information periodically provided by the Agent; analyses of client, distributor, broker-dealer, and vendor lists; and information derived from other sources, including public filings. The Proxy Coordinator gathers and analyzes this information on a best efforts basis, as much of this information is provided directly by individuals and groups other than the Proxy Coordinator, and the Advisers rely upon the accuracy of the information received from such parties. Such potential conflicts of interest shall be documented as deemed appropriate by Counsel, e.g. , on a consolidated basis rather than individual Conflicts Reports. Upon Counsels finding that a conflict of interest exists that could unduly influence vote recommendation(s) (a material conflict of interest) with respect to the Agent, the Advisers, Underwriters, or Affiliates, the participating members of the Proxy Group shall not be required to complete a Conflicts Report in connection with the relevant proxy.
If Counsel determines that a material conflict of interest appears to exist with respect to the Agent, the Advisers, Underwriters, or Affiliates, any participating member of the Proxy Group, or any participating Investment Professional(s), the Proxy Coordinator will then contact the Compliance Committee(s), generally through the Committee Chair, and forward all information relevant to the Committees review, including the following materials or a summary thereof: the applicable Procedures and Guidelines; the recommendation of the Agent, where applicable; the recommendation of the Investment Professional(s), where applicable; any resources used by the Proxy Group in arriving at its recommendation; the Conflicts Report and/or any other written materials establishing whether a conflict of interest exists; and findings of Counsel).
If Counsel determines that there does not appear to be a material conflict of interest with respect to the Agent, the Advisers, Underwriters, Affiliates, any participating member of the Proxy Group, or any participating Investment Professional(s), the Proxy Coordinator will instruct the Agent to vote the proxy as recommended by the Proxy Group.
A vote that is contrary to the Agents recommendation, but is based on input from an Investment Professional provided in connection with a Guideline requiring case-by-case review while specifying that primary consideration will be given to such input, shall be not be deemed an Out-of-Guidelines Vote if the Investment Professional completes and returns a Conflicts Report and Counsel determines that no material conflict of interest appears to be present. The Proxy Group members shall not be required to complete a Conflicts Report in connection with such votes.
4. Referrals to a Funds Compliance Committee
A Funds Compliance Committee may consider all recommendations, analysis, research and Conflicts Reports provided to it by the Proxy Coordinator, Agent, Proxy Group, and/or Investment Professional(s), and any other written materials used to establish whether a conflict of interest exists, in determining how to vote the proxies referred to the Committee. The Committee, generally through the Committee Chair, will instruct the Proxy Coordinator how such referred proposals should be voted.
The Proxy Coordinator shall use best efforts to timely refer matters to a Funds Committee for its consideration. In the event any such matter cannot be timely referred to or considered by the Committee, it shall be the policy of the Funds, except as noted below, to vote Within Guidelines, except that Counsel may permit the Proxy Group to abstain from voting any proposal(s) subject to the material conflict, provided such abstention does not have the same effect as an against vote and therefore has no effect on the outcome of the vote. If the Agents recommendation is deemed by Counsel to be materially conflicted on a matter, no action shall be taken on such matter, either by abstaining from voting any proposal(s) subject to the material conflict or not voting the entire proxy ( i.e. , a Non-Vote), as deemed appropriate by Counsel with respect to the nature of the Agents material conflict.
The Proxy Coordinator will maintain a record of all proxy questions that have been referred to a Funds Committee, as well as all applicable recommendations, analysis, research, Conflicts Reports, and vote determinations.
5. Consultation with a Funds Compliance Committee
The Proxy Coordinator may consult with the Chair of a Funds Compliance Committee for guidance on behalf of the Committee if application of the Procedures and Guidelines is unclear or in connection with any unusual or controversial issue or a recommendation received from an Investment Professional. The Chair may consider all recommendations, analysis, research, or Conflicts Reports provided by the Agent, Proxy Group, and/or Investment Professional(s). The Chair may provide guidance or direct the Proxy Coordinator to refer the proposal(s) to the full Compliance Committee. The guidance of the Chair, or the Committee, as applicable, shall be given primary consideration by the Proxy Group in making a vote determination.
The Proxy Coordinator will maintain a record of all proxy questions that have been referred to the Chair or Committee for guidance, as well as all applicable recommendations, analysis, research, Conflicts Reports and vote determinations.
VI. Conflicts of Interest
In all cases in which a vote has not been clearly determined in advance by the Procedures and Guidelines or for which the Proxy Group recommends an Out-of-Guidelines Vote, and Counsel
has determined that a material conflict of interest appears to exist with respect to the Agent, the Advisers, Underwriters, Affiliates, any participating member of the Proxy Group, or any Investment Professional participating in the voting process, the proposal shall be referred to the Funds Committee for determination so that the Adviser shall have no opportunity to exercise voting discretion over a Funds proxy in a situation in which the Adviser or its Underwriters or Affiliates or the Agent may be deemed to have a conflict of interest. In the event a member of a Funds Committee believes he/she has a conflict of interest that would preclude him/her from making a vote determination in the best interests of the beneficial owners of the applicable Fund, such Committee member shall so advise the Committee Chair and recuse himself/herself with respect to determinations regarding the relevant proxy.
VII. Reporting and Record Retention
A. Reporting by the Funds
Annually in August, each Fund and each Sub-Adviser-Voted Series will post its proxy voting record, or a link thereto, for the prior one-year period ending on June 30 th on the Voya funds website. The proxy voting record for each Fund and each Sub-Adviser-Voted Series will also be available on Form N-PX in the EDGAR database on the website of the Securities and Exchange Commission (SEC). For any Voya fund that is a feeder in a master/feeder structure, no proxy voting record related to the portfolio securities owned by the master fund will be posted on the Voya funds website or included in the Funds Form N-PX; however, a cross-reference to the master funds proxy voting record as filed in the SECs EDGAR database will be included in the Funds Form N-PX and posted on the Voya funds website. If any Feeder Fund was solicited for vote by its underlying master fund during the reporting period, a record of the votes cast by means of the pass-through process described in Section III. above will be included on the Voya funds website and in the Feeder Funds Form N-PX.
B. Reporting to a Funds Compliance Committee
At each regularly scheduled meeting, the Committee will receive a report from the Proxy Coordinator indicating each proxy proposal, or a summary of such proposals, that was (1) voted Out-of-Guidelines, including any proposals voted Out-of-Guidelines pursuant to special circumstances raised by an Investment Professional; (2) voted Within Guidelines in cases in which an Investment Professionals recommendation was not adopted by the Proxy Group; or (3) referred to the Committee for determination in accordance with Section V. hereof. Such report shall indicate the name of the issuer, the substance of the proposal, a summary of the Investment Professionals recommendation, where applicable, and the reasons for voting, or recommending, an Out-of-Guidelines Vote or, in the case of (2) above, a Within-Guidelines Vote.
EXHIBIT 1 List of Voya funds
VOYA ASIA PACIFIC HIGH DIVIDEND EQUITY INCOME FUND
VOYA BALANCED PORTFOLIO, INC.
VOYA EMERGING MARKETS HIGH DIVIDEND EQUITY FUND
VOYA EQUITY TRUST
VOYA FUNDS TRUST
VOYA GLOBAL ADVANTAGE AND PREMIUM OPPORTUNITY FUND
VOYA GLOBAL EQUITY DIVIDEND AND PREMIUM OPPORTUNITY FUND
VOYA INFRASTRUCTURE, INDUSTRIALS AND MATERIALS FUND
VOYA INTERMEDIATE BOND PORTFOLIO
VOYA INTERNATIONAL HIGH DIVIDEND EQUITY INCOME FUND
VOYA INVESTORS TRUST(4)
VOYA MONEY MARKET PORTFOLIO
VOYA MUTUAL FUNDS
VOYA PARTNERS, INC.
VOYA PRIME RATE TRUST
VOYA NATURAL RESOURCES EQUITY INCOME FUND
VOYA SENIOR INCOME FUND
VOYA SEPARATE PORTFOLIOS TRUST
VOYA SERIES FUND, INC.
VOYA STRATEGIC ALLOCATION PORTFOLIOS, INC.
VOYA VARIABLE FUNDS
VOYA VARIABLE INSURANCE TRUST
VOYA VARIABLE PORTFOLIOS, INC.
VOYA VARIABLE PRODUCTS TRUST
(4) Sub-Adviser-Voted Series: VY Franklin Mutual Shares Portfolio
EXHIBIT 2 Proxy Voting Procedures of the Advisers
Voya Investments, LLC
and
Directed Services LLC
I. Introduction
Voya Investments, LLC and Directed Services LLC (each an Adviser and collectively, the Advisers) are the investment advisers for the registered investment companies and each series or portfolio thereof (each a Fund and collectively, the Funds) comprising the Voya family of funds. As such, the Advisers have been delegated the authority to vote proxies with respect to securities for certain Funds over which they have day-to-day portfolio management responsibility.
The Advisers will abide by the proxy voting guidelines adopted by a Funds respective Board of Directors or Trustees (each a Board and collectively, the Boards) with regard to the voting of proxies unless otherwise provided in the proxy voting procedures adopted by a Funds Board.
In voting proxies, the Advisers are guided by general fiduciary principles. Each must act prudently, solely in the interest of the beneficial owners of the Funds it manages. The Advisers will not subordinate the interest of beneficial owners to unrelated objectives. Each Adviser will vote proxies in the manner that it believes will do the most to maximize shareholder value.
The following are the Proxy Voting Procedures of Voya Investments, LLC and Directed Services LLC (the Adviser Procedures) with respect to the voting of proxies on behalf of their client Funds as approved by the respective Board of each Fund.
Unless otherwise noted, best efforts shall be used to vote proxies in all instances.
II. Roles and Responsibilities
A. Proxy Coordinator
The Proxy Coordinator identified in Appendix 1 will assist in the coordination of the voting of each Funds proxies in accordance with the Voya family of funds Proxy Voting Procedures and Guidelines (the Procedures or Guidelines and collectively, the Procedures and Guidelines). The Proxy Coordinator is authorized to direct the Agent to vote a Funds proxy in accordance with the Procedures and Guidelines unless the Proxy Coordinator receives a recommendation from an Investment Professional (as described below) to vote contrary to the Guidelines. In such event, and in connection with proxy proposals requiring case-by-case consideration (except in cases in which the Proxy Group has previously provided the Proxy Coordinator with standing instructions to vote in accordance with the Agents recommendation), the Proxy Coordinator will call a meeting of the Proxy Group (as described below).
Responsibilities assigned herein to the Proxy Coordinator, or activities in support thereof, may be performed by such members of the Proxy Group or employees of the Advisers Affiliates as are deemed appropriate by the Proxy Group.
Unless specified otherwise, information provided to the Proxy Coordinator in connection with duties of the parties described herein shall be deemed delivered to the Advisers.
B. Agent
An independent proxy voting service (the Agent), as approved by the Board of each Fund, shall be engaged to assist in the voting of Fund proxies for publicly traded securities through the provision of vote analysis, implementation, recordkeeping, and disclosure services. The Agent is Institutional Shareholder Services Inc., a subsidiary of MSCI Inc. The Agent is responsible for coordinating with the Funds custodians to ensure that all proxy materials received by the custodians relating to the portfolio securities are processed in a timely fashion. To the extent applicable, the Agent is required to vote and/or refer all proxies in accordance with these Adviser Procedures. The Agent will retain a record of all proxy votes handled by the Agent. Such record must reflect all the information required to be disclosed in a Funds Form N-PX pursuant to Rule 30b1-4 under the Investment Company Act. In addition, the Agent is responsible for maintaining copies of all proxy statements received by issuers and to promptly provide such materials to the Adviser upon request.
The Agent shall be instructed to vote all proxies in accordance with a Funds Guidelines, except as otherwise instructed through the Proxy Coordinator by the Advisers Proxy Group or a Funds Compliance Committee (Committee).
The Agent shall be instructed to obtain all proxies from the Funds custodians and to review each proxy proposal against the Guidelines. The Agent also shall be requested to call the Proxy Coordinators attention to specific proxy proposals that although governed by the Guidelines appear to involve unusual or controversial issues.
Subject to the oversight of the Advisers, the Agent shall establish and maintain adequate internal controls and policies in connection with the provision of proxy voting services voting to the Advisers, including methods to reasonably ensure that its analysis and recommendations are not influenced by conflict of interest, and shall disclose such controls and policies to the Advisers when and as provided for herein. Unless otherwise specified, references herein to recommendations of the Agent shall refer to those in which no material conflict of interest has been identified.
C. Proxy Group
The Adviser shall establish a Proxy Group (the Group or Proxy Group) which shall assist in the review of the Agents recommendations when a proxy voting issue is referred to the Group through the Proxy Coordinator. The members of the Proxy Group, which may include employees of the Advisers Affiliates, are identified in Appendix 1 , as may be amended from time at the Advisers discretion.
A minimum of four (4) members of the Proxy Group (or three (3) if one member of the quorum is either the Funds Chief Investment Risk Officer or Chief Financial Officer) shall constitute a quorum for purposes of taking action at any meeting of the Group. The vote of a simple majority of the members present and voting shall determine any matter submitted to a vote, except that tie votes shall be resolved by securing the vote of members not present at the meeting; provided, however, that the Proxy Coordinator shall ensure compliance with all applicable voting and conflict of interest procedures and shall use best efforts to secure votes from as many absent members as may reasonably be accomplished and to provide such members with a substantially similar level of relevant information as that provided at the in-person meeting. In the event a tie vote cannot be timely resolved in this manner in connection with a voting deadline, or in the event that the vote remains a tie, the Proxy Coordinator shall follow the procedures established by a Funds Board for resolving a material conflict of interest. In the event a tie vote cannot be timely resolved in this manner, the Proxy Coordinator shall follow the procedures established by a Funds Board to address a failure to timely meet quorum requirements. A member of the Proxy Group may abstain from voting on any given matter, provided that the member does not participate in the Proxy Group discussion(s) in connection with the vote determination. If abstention results in the loss of quorum, the process for resolving tie votes shall be observed.
The Proxy Group may meet in person or by telephone. The Proxy Group also may take action via electronic mail in lieu of a meeting, provided that each Group member has received a copy of any relevant electronic mail transmissions circulated by each other participating Group member prior to voting and provided that the Proxy Coordinator follows the directions of a majority of a quorum (as defined above) responding via electronic mail. For all votes taken in person or by telephone or teleconference, the vote shall be taken outside the presence of any person other than the members of the Proxy Group and such other persons whose attendance may be deemed appropriate by the Proxy Group from time to time in furtherance of its duties or the day-to-day administration of the Funds. In its discretion, the Proxy Group may provide the Proxy Coordinator with standing instructions to perform responsibilities assigned herein to the Proxy Group, or activities in support thereof, on its behalf, provided that such instructions do not contravene any requirements of these Adviser Procedures or a Funds Procedures and Guidelines.
A meeting of the Proxy Group will be held whenever (1) the Proxy Coordinator receives a recommendation from an Investment Professional to vote a Funds proxy contrary to the Guidelines, or the recommendation of the Agent, where applicable, (2) the Agent has made no recommendation on a matter and the Procedures and Guidelines are silent, or (3) a matter requires case-by-case consideration, including those in which the Agents recommendation is deemed to be materially conflicted as provided for herein, provided that, if the Proxy Group has previously provided the Proxy Coordinator with standing instructions to vote in accordance with the Agents recommendation and no issue of conflict must be considered, the Proxy Coordinator may implement the instructions without calling a meeting of the Proxy Group.
For each proposal referred to the Proxy Group, it will review (1) the relevant Procedures and Guidelines, (2) the recommendation of the Agent, if any, (3) the recommendation of the Investment Professional(s), if any, and (4) any other resources that any member of the Proxy Group deems appropriate to aid in a determination of a recommendation.
If the Proxy Group recommends that a Fund vote in accordance with the Procedures and Guidelines, or the recommendation of the Agent, where applicable, it shall instruct the Proxy Coordinator to so advise the Agent, except that the Proxy Coordinator shall follow any procedures established by a Funds Board with respect to recommendations received from an Investment Professional.
If the Proxy Group recommends that a Fund vote contrary to the Guidelines, or the recommendation of the Agent, where applicable, or if the Agents recommendation on a matter is deemed to be materially conflicted as provided for herein, it shall follow the procedures for such voting as established by a Funds Board. The Proxy Group may vote contrary to the Guidelines based on a recommendation from an Investment Professional, provided that incorporation of any such recommendation shall be subject to the conflict of interest review process established by a Funds Board.
The Proxy Coordinator shall use best efforts to convene the Proxy Group with respect to all matters requiring its consideration. In the event quorum requirements cannot be timely met in connection with a voting deadline, the Proxy Coordinator shall follow the procedures for such voting as established by a Funds Board.
D. Investment Professionals
The Funds Sub-Advisers and/or portfolio managers (each referred to herein as an Investment Professional and collectively, Investment Professionals) may submit, or be asked to submit, a recommendation to the Proxy Group regarding the voting of proxies related to the portfolio securities over which they have day-to-day portfolio management responsibility. The Investment Professionals may accompany their recommendation with any other research materials that they deem appropriate or with a request that the vote be deemed material in the context of the portfolio(s) they manage, such that lending activity on behalf of such portfolio(s) with respect to the relevant security should be reviewed by the Proxy Group and considered for recall and/or restriction. Input from the relevant Investment Professionals shall be given primary consideration in the Proxy Groups determination of whether a given proxy vote is to be deemed material and the associated security accordingly restricted from lending. The determination that a vote is material in the context of a Funds portfolio shall not mean that such vote is considered material across all Funds voting that meeting. In order to recall or restrict shares timely for material voting purposes, the Proxy Group shall use best efforts to consider, and when deemed appropriate, to act upon, such requests timely. Requests to review lending activity in connection with a potentially material vote may be initiated by any relevant Investment Professional and submitted for the Proxy Groups consideration at any time.
III. Voting Procedures
A. In all cases, the Adviser shall follow the voting procedures as set forth in the Procedures and Guidelines of the Fund on whose behalf the Adviser is exercising delegated authority to vote.
B. Routine Matters
The Agent shall be instructed to submit a vote in accordance with the Guidelines where such Guidelines provide a clear policy ( e.g. , For, Against, Withhold, or Abstain) on a proposal. However, the Agent shall be directed to refer any proxy proposal to the Proxy Coordinator for instructions as if it were a matter requiring case-by-case consideration under circumstances where the application of the Guidelines is unclear, it appears to involve unusual or controversial issues, or an Investment Professional recommends a vote contrary to the Guidelines.
C. Matters Requiring Case-by-Case Consideration
The Agent shall be directed to refer proxy proposals accompanied by its written analysis and voting recommendation to the Proxy Coordinator where the Guidelines have noted case-by-case consideration.
Upon receipt of a referral from the Agent, the Proxy Coordinator may solicit additional research from the Agent, Investment Professional(s), as well as from any other source or service.
Except in cases in which the Proxy Group has previously provided the Proxy Coordinator with standing instructions to vote in accordance with the Agents recommendation, the Proxy Coordinator will forward the Agents analysis and recommendation and/or any research obtained from the Investment Professional(s), the Agent, or any other source to the Proxy Group. The Proxy Group may consult with the Agent and/or Investment Professional(s), as it deems necessary.
1. Within-Guidelines Votes: Votes in Accordance with a Funds Guidelines and/or, where applicable, Agent Recommendation
In the event the Proxy Group and, where applicable, any Investment Professional participating in the voting process, recommend a vote Within Guidelines, the Proxy Group will instruct the Agent, through the Proxy Coordinator, to vote in this manner, except that the Proxy Coordinator shall follow any procedures established by a Funds Board with respect to recommendations received from an Investment Professional. Except as provided for herein, no Conflicts Report (as such term is defined herein) is required in connection with Within-Guidelines Votes.
2. Non-Votes: Votes in Which No Action is Taken
The Proxy Group may recommend that a Fund refrain from voting under circumstances including, but not limited to, the following: (1) if the economic effect on shareholders interests or the value of the portfolio holding is
indeterminable or insignificant, e.g. , proxies in connection with fractional shares, securities no longer held in the portfolio of a Voya fund or proxies being considered on behalf of a Fund that is no longer in existence; or (2) if the cost of voting a proxy outweighs the benefits, e.g. , certain international proxies, particularly in cases in which share blocking practices may impose trading restrictions on the relevant portfolio security. In such instances, the Proxy Group may instruct the Agent, through the Proxy Coordinator, not to vote such proxy. The Proxy Group may provide the Proxy Coordinator with standing instructions on parameters that would dictate a Non-Vote without the Proxy Groups review of a specific proxy.
Reasonable efforts shall be made to secure and vote all other proxies for the Funds, but, particularly in markets in which shareholders rights are limited, Non-Votes may also occur in connection with a Funds related inability to timely access ballots or other proxy information in connection with its portfolio securities.
Non-Votes may also result in certain cases in which the Agents recommendation has been deemed to be conflicted, as provided for in the Funds Procedures.
3. Out-of-Guidelines Votes: Votes Contrary to Procedures and Guidelines, or Agent Recommendation, where applicable; Where No Recommendation is Provided by Agent; or Where Agents Recommendation is Conflicted
If the Proxy Group or, where applicable, an Investment Professional, recommends that a Fund vote contrary to the Guidelines, or the recommendation of the Agent, where applicable; if the Agent has made no recommendation on a matter and the Procedures and Guidelines are silent; or the Agents recommendation on a matter is deemed to be materially conflicted as provided for under these Adviser Procedures, the Proxy Coordinator will then implement the procedures for handling such votes as adopted by the Funds Board.
The Proxy Coordinator will maintain a record of all recommendations from Investment Professionals to vote contrary to the Guidelines, all proxy questions that have been referred to a Funds Compliance Committee, and all applicable recommendations, analysis, research, Conflicts Reports, and vote determinations.
IV. Assessment of the Agent and Conflicts of Interest
In furtherance of the Advisers fiduciary duty to the Funds and their beneficial owners, the Advisers shall establish the following:
A. Assessment of the Agent
The Advisers shall establish that the Agent (1) is independent from the Advisers, (2) has resources that indicate it can competently provide analysis of proxy issues, and (3) can make recommendations in an impartial manner and in the best interests of the Funds and their beneficial owners. The Advisers shall utilize, and the Agent shall comply with, such methods for establishing the foregoing as the
Advisers may deem reasonably appropriate and shall do so not less than annually as well as prior to engaging the services of any new proxy service. The Agent shall also notify the Advisers in writing within fifteen (15) calendar days of any material change to information previously provided to an Adviser in connection with establishing the Agents independence, competence, or impartiality.
Information provided in connection with assessment of the Agent shall be forwarded to a member of the mutual funds practice group of Voya Investment Management (Counsel) for review. Counsel shall review such information and advise the Proxy Coordinator as to whether a material concern exists and if so, determine the most appropriate course of action to eliminate such concern.
B. Conflicts of Interest
The Advisers shall establish and maintain procedures to identify and address potential conflicts that may arise from time to time concerning the Agent. Upon the Advisers request, which shall be not less than annually, and within fifteen (15) calendar days of any material change to such information previously provided to an Adviser, the Agent shall provide the Advisers with such information as the Advisers deem reasonable and appropriate for use in determining material relationships of the Agent that may pose a conflict of interest with respect to the Agents proxy analysis or recommendation(s). The Proxy Coordinator shall forward all such information to Counsel for review. Counsel shall review such information and provide the Proxy Coordinator with a brief statement regarding whether or not a material conflict of interest is present. Matters as to which a material conflict of interest is deemed to be present shall be handled as provided in the Funds Procedures and Guidelines.
In connection with their participation in the voting process for portfolio securities, each member of the Proxy Group, and each Investment Professional participating in the voting process, must act solely in the best interests of the beneficial owners of the applicable Fund. The members of the Proxy Group may not subordinate the interests of the Funds beneficial owners to unrelated objectives, including taking steps to reasonably insulate the voting process from any conflict of interest that may exist in connection with the Agents services or utilization thereof.
For all matters for which the Proxy Group or, where applicable, an Investment Professional, recommends an Out-of-Guidelines Vote, or for which a recommendation contrary to that of the Guidelines or, where applicable, the Agent, has been received from an Investment Professional, the Proxy Coordinator will implement the procedures for handling such votes as adopted by the Funds Board, including completion of such Conflicts Reports as may be required under the Funds Procedures. Completed Conflicts Reports should be provided to the Proxy Coordinator within two (2) business days and may be submitted to the Proxy Coordinator verbally, provided the Proxy Coordinator documents the Conflicts Report in writing. Such Conflicts Report should describe any known relationships of either a business or personal nature not previously assessed by Counsel, which may include communications with respect to the referral item, but
excluding routine communications with or submitted to the Proxy Coordinator or Investment Professional(s) on behalf of the subject company or a proponent of a shareholder proposal. The Conflicts Report should also include written confirmation that any recommendation from an Investment Professional provided in connection with an Out-of-Guidelines Vote or under circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration.
The Proxy Coordinator shall forward all Conflicts Reports to Counsel for review. Counsel shall review each report and provide the Proxy Coordinator with a brief statement regarding whether or not a material conflict of interest is present. Matters as to which a material conflict of interest is deemed to be present shall be handled as provided in the Funds Procedures and Guidelines.
V. Reporting and Record Retention
The Adviser shall maintain the records required by Rule 204-2(c)(2), as may be amended from time to time, including the following: (1) A copy of each proxy statement received regarding a Funds portfolio securities. Such proxy statements received from issuers are available either in the SECs EDGAR database or are kept by the Agent and are available upon request. (2) A record of each vote cast on behalf of a Fund. (3) A copy of any document created by the Adviser that was material to making a decision how to vote a proxy, or that memorializes the basis for that decision. (4) A copy of written requests for Fund proxy voting information and any written response thereto or to any oral request for information on how the Adviser voted proxies on behalf of a Fund. All proxy voting materials and supporting documentation will be retained for a minimum of six (6) years, the first two (2) years in the Advisers office.
APPENDIX 1 Proxy Group
Name |
|
Title or Affiliation |
|
|
|
Stanley D. Vyner |
|
Chief Investment Risk Officer and Executive Vice President, Voya Investments, LLC |
|
|
|
Todd Modic |
|
Senior Vice President, Voya Funds Services, LLC and Voya Investments, LLC; and Chief Financial Officer of the Voya Family of Funds |
|
|
|
Maria Anderson |
|
Vice President, Fund Compliance, Voya Funds Services, LLC |
|
|
|
Sara Donaldson |
|
Proxy Coordinator for the Voya Family of Funds and Vice President, Proxy Voting, Voya Funds Services, LLC |
|
|
|
Julius A. Drelick III, CFA |
|
Senior Vice President, Head of Fund Compliance, Voya Funds Services, LLC |
|
|
|
Harley Eisner |
|
Vice President, Financial Analysis, Voya Funds Services, LLC |
|
|
|
Evan Posner, Esq. |
|
Vice President and Counsel, Voya Family of Funds |
Effective as of May 1, 2014
EXHIBIT 3 Proxy Voting Guidelines of the Voya funds
I. Introduction
The following is a statement of the Proxy Voting Guidelines (Guidelines) that have been adopted by the respective Boards of Directors or Trustees of each Fund. Unless otherwise provided for herein, any defined term used herein shall have the meaning assigned to it in the Funds and Advisers Proxy Voting Procedures (the Procedures).
Proxies must be voted in the best interest of the Fund(s). The Guidelines summarize the Funds positions on various issues of concern to investors, and give a general indication of how Fund portfolio securities will be voted on proposals dealing with particular issues. The Guidelines are not exhaustive and do not include all potential voting issues.
The Advisers, in exercising their delegated authority, will abide by the Guidelines as outlined below with regard to the voting of proxies except as otherwise provided in the Procedures. In voting proxies, the Advisers are guided by general fiduciary principles. Each must act prudently, solely in the interest of the beneficial owners of the Funds it manages. The Advisers will not subordinate the interest of beneficial owners to unrelated objectives. Each Adviser will vote proxies in the manner that it believes will do the most to maximize shareholder value.
II. Guidelines
The following Guidelines are grouped according to the types of proposals generally presented to shareholders of U.S. issuers: Board of Directors, Proxy Contests, Auditors, Proxy Contest Defenses, Tender Offer Defenses, Miscellaneous, Capital Structure, Executive and Director Compensation, State of Incorporation, Mergers and Corporate Restructurings, Mutual Fund Proxies, and Social and Environmental Issues. An additional section addresses proposals most frequently found in global proxies.
General Policies
These Guidelines apply to securities of publicly traded companies and to those of privately held companies if publicly available disclosure permits such application. All matters for which such disclosure is not available shall be considered CASE-BY-CASE.
In all cases receiving CASE-BY-CASE consideration, including cases not specifically provided for under these Guidelines, unless otherwise determined in accordance with the Procedures or otherwise provided for under these Guidelines, it shall generally be the policy of the Funds to vote in accordance with the recommendation provided by the Funds Agent, Institutional Shareholder Services Inc., a subsidiary of MSCI Inc.
Unless otherwise provided for herein, it shall generally be the policy of the Funds to vote in accordance with the Agents recommendation when such recommendation aligns with the recommendation of the relevant issuers management or management has made no recommendation. However, this policy shall not apply to CASE-BY-CASE proposals for which a contrary recommendation from the relevant Investment Professional(s) has been received and
is to be utilized, provided that incorporation of any such recommendation shall be subject to the conflict of interest review process required under the Procedures.
Recommendations from the Investment Professionals, while not required under the Procedures, may be submitted or requested in connection with any proposal and are likely to be requested with respect to proxies for private equity securities and/or proposals related to merger transactions/corporate restructurings, proxy contests, or unusual or controversial issues. Such input shall be given primary consideration with respect to CASE-BY-CASE proposals being considered on behalf of the relevant Fund, provided that incorporation of any such recommendation shall be subject to the conflict of interest review process required under the Procedures.
Except as otherwise provided for herein, it shall generally be the policy of the Funds not to support proposals that would impose a negative impact on existing rights of the Funds to the extent that any positive impact would not be deemed sufficient to outweigh removal or diminution of such rights.
The foregoing policies may be overridden in any case as provided for in the Procedures. Similarly, the Procedures provide that proposals whose Guidelines prescribe a firm voting position may instead be considered on a CASE-BY-CASE basis when unusual or controversial circumstances so dictate.
Interpretation and application of these Guidelines is not intended to supersede any law, regulation, binding agreement, or other legal requirement to which an issuer may be or become subject. No proposal shall be supported whose implementation would contravene such requirements.
1. The Board of Directors
Voting on Director Nominees in Uncontested Elections
Unless otherwise provided for herein, the Agents standards with respect to determining director independence shall apply. These standards generally provide that, to be considered completely independent, a director shall have no material connection to the company other than the board seat.
Agreement with the Agents independence standards shall not dictate that a Funds vote shall be cast according to the Agents corresponding recommendation. Votes on director nominees not subject to specific policies described herein should be made on a CASE-BY-CASE basis.
Where applicable and except as otherwise provided for herein, it shall generally be the policy of the Funds to lodge disagreement with an issuers policies or practices by withholding support from a proposal for the relevant policy or practice rather than the director nominee(s) to which the Agent assigns a correlation. Support shall be withheld from nominees deemed responsible for governance shortfalls, but if they are not standing for election ( e.g. , the board is classified), support shall generally not be withheld from others in their stead. When a determination is made to withhold support due to concerns other than those related to an individual directors independence or actions, responsibility may be attributed to the entire board, a committee, or an
individual (such as the CEO or committee chair), taking into consideration whether the desired effect is to send a message or to remove the director from service.
Where applicable and except as otherwise provided for herein, generally vote FOR nominees in connection with issues raised by the Agent if the nominee did not serve on the board or relevant committee during the majority of the time period relevant to the concerns cited by the Agent.
WITHHOLD support from a nominee who, during both of the most recent two years, attended less than 75 percent of the board and committee meetings during the nominees period of service without a valid reason for the absences. WITHHOLD support if two-year attendance cannot be ascertained from available disclosure. DO NOT WITHHOLD support in connection with attendance issues for nominees who have served on the board for less than the two most recent years.
Unless a company has implemented a policy that should reasonably prevent abusive use of its poison pill, WITHHOLD support from nominees responsible for implementing excessive anti-takeover measures, including failure to remove restrictive poison pill features or to ensure a pills expiration or timely submission to shareholders for vote. Responsibility will generally be assigned to the board chair or, if not standing for election, the lead director. If neither is standing for election, WITHHOLD support from all continuing directors.
Consider on a CASE-BY-CASE basis any nominee whom the Agent cites as having failed to implement a majority-approved shareholder proposal. Vote FOR if the shareholder proposal has been reasonably addressed. Proposals seeking shareholder ratification of a poison pill may be deemed reasonably addressed if the company has implemented a policy that should reasonably prevent abusive use of the pill. WITHHOLD support if the shareholder proposal at issue is supported under these Guidelines and the board has not disclosed a credible rationale for not implementing the proposal.
Consider on a CASE-BY-CASE basis any nominee whom the Agent cites as having failed to opt out of a state law requiring companies to implement a staggered board structure, generally withholding support when the company:
(1) Demonstrates sustained poor stock performance (measured by one- and three-year total shareholder returns);
(2) Has a non-shareholder-approved poison pill in place, without provisions to redeem or seek approval in a reasonable period of time; and
(3) Maintains a dual class capital structure, imposes a supermajority vote requirement, or has authority to issue blank check preferred stock.
If the board has not acted upon negative votes (WITHHOLD or AGAINST, as applicable based on the issuers election standard) representing a majority of the votes cast at the previous annual meeting, consider board nominees on a CASE-BY-CASE basis. Generally, vote FOR nominees when:
(1) The issue relevant to the majority negative vote has been adequately addressed or cured, which may include disclosure of the boards rationale; or
(2) The Funds Guidelines or voting record do not support the relevant issue causing the majority negative vote.
If the above provisions have not been satisfied, generally WITHHOLD support from the chair of the nominating committee, or if not standing for election, consider CASE-BY-CASE.
WITHHOLD support from inside or affiliated outside directors who sit on the audit committee.
Vote FOR inside or affiliated outside directors who sit on the nominating or compensation committee, provided that such committee meets the applicable independence requirements of the relevant listing exchange.
Vote FOR inside or affiliated outside directors if the full board serves as the compensation or nominating committee OR has not created one or both committees, provided that the issuer is in compliance with all provisions of the listing exchange in connection with performance of relevant functions ( e.g. , performance of relevant functions by a majority of independent directors in lieu of the formation of a separate committee).
Compensation Practices:
It shall generally be the policy of the Funds that matters of compensation are best determined by an independent board and compensation committee, but that support may be withheld from compensation committee members whose actions or disclosure do not appear to support compensation practices aligned with the best interests of the company and its shareholders. Votes on compensation committee members in connection with compensation practices should be considered on a CASE-BY-CASE basis, and generally:
(1) Say on pay . If shareholders have been provided with an advisory vote on executive compensation (say on pay, or SOP), and practices not supported under these Guidelines have been identified, it shall generally be the policy of the Funds to align with the Agent when a vote AGAINST the say on pay proposal has been recommended in lieu of withholding support from certain nominees for compensation concerns. Issuers receiving negative recommendations on both compensation committee members and say on pay regarding issues not otherwise supported by these Guidelines will be considered on a CASE-BY-CASE basis.
(2) Say on pay responsiveness . Compensation committee members opposed by the Agent for failure to sufficiently address compensation concerns evidenced by significant opposition to the most recent SOP vote will be considered on a CASE-BY-CASE basis, factoring in the following:
(a) If the most recent SOP vote received majority opposition, generally vote AGAINST the compensation committee chair if the company has not
demonstrated an adequate level of responsiveness.
(b) If the most recent SOP vote passed but received significant opposition, generally vote FOR the nominee(s) if a Fund voted FOR that SOP proposal or did not have voting rights on that proposal. If a Fund voted AGAINST the SOP proposal and the company has not demonstrated an adequate level of responsiveness, generally vote AGAINST the compensation committee chair.
(c) If the compensation committee chair is not standing for election under circumstances meriting the chairs opposition, consider the compensation committee member(s) opposed by the Agent on a CASE-BY-CASE basis.
(3) Say on frequency . If the Agent opposes nominees because the company has implemented an SOP schedule that is less frequent than the frequency most recently preferred by at least a plurality of shareholders, generally WITHHOLD support from the compensation committee chair. If the compensation committee chair is not standing for election, WITHHOLD support from the other compensation committee members. If no compensation committee members are standing for election, consider other nominees opposed by the Agent on a CASE-BY-CASE basis.
(4) Tenure . Where applicable and except as otherwise provided for herein, vote FOR compensation committee members who did not serve on the compensation committee during the majority of the time period relevant to the concerns cited by the Agent.
(5) Pay for performance . Consider compensation committee members receiving an adverse recommendation from the Agent CASE-BY-CASE when the Agent has identified a pay practice (or combination of practices) not otherwise supported under these Guidelines that appears to have created a misalignment between CEO pay and performance with regard to shareholder value. Generally vote FOR nominees if the company has provided a reasonable rationale regarding pay and performance and/or they appear reasonably correlated. G enerally WITHHOLD support from compensation committee members for structuring compensation packages that unreasonably insulate pay from performance conditions.
(6) Pay disparity . Generally DO NOT WITHHOLD support from compensation committee members solely due to internal pay disparity as assessed by the Agent, but consider pay magnitude concerns on a CASE-BY-CASE basis.
(7) Change in control provisions . If the Agent recommends withholding support from compensation committee members in connection with overly liberal change in control provisions, including those lacking a double trigger, generally WITHHOLD support from such nominees. If the Agent recommends withholding support from compensation committee members in connection with potential change in control payments or tax-gross-ups on change in control payments, vote FOR the nominees if the amount appears reasonable and no material governance concerns exist. Generally WITHHOLD support if the amount is so significant (individually or collectively) as to potentially influence an executives decision to enter into a transaction or to effectively act as a poison pill.
(8) Repricing . If the Agent recommends withholding support from compensation committee members in connection with their failure to seek, or acknowledge, a
shareholder vote on plans to reprice, replace, buy back, or exchange options, generally WITHHOLD support from such nominees, except that cancellation of options would not be considered an exchange unless the cancelled options were regranted or expressly returned to the plan reserve for reissuance.
(9) Tax benefits . If the Agent recommends withholding support from compensation committee members that have approved compensation that is ineligible for tax benefits to the company ( e.g. , under Section 162(m) of OBRA), generally vote FOR such nominees if the company has provided an adequate rationale or the plan itself is being put to shareholder vote at the same meeting . If the plan is up for vote, the provisions under Section 8. OBRA-Related Compensation Proposals shall apply.
(10) Director perquisites . If the Agent recommends withholding support from compensation committee members in connection with director compensation in the form of perquisites, generally vote FOR the nominees if the cost is reasonable in the context of the directors total compensation and the perquisites themselves appear reasonable given their purpose, the directors duties, and the companys line of business.
(11) Incentive plans . Generally consider nominees on a CASE-BY-CASE basis in connection with short-term incentive plans over which the nominee has exercised discretion to exclude extraordinary items, and WITHHOLD support if treatment of such items has been inconsistent ( e.g. , exclusion of losses but not gains). Generally WITHHOLD support from compensation committee members opposed by the Agent in connection with long-term incentive plans, or total executive compensation packages, inadequately aligned with shareholders because the vesting period is too short, performance period being measured is too short, or the packages lack an appropriate equity component ( e.g., overly cash-based plans), except that the latter will be considered CASE-BY-CASE in connection with executives already holding significant equity positions.
(12) Options backdating . If the Agent has raised issues of options backdating , consider members of the compensation committee, as well as company executives nominated as directors, on a CASE-BY-CASE basis.
(13) Independence from management . Generally WITHHOLD support from compensation committee members cited by the Agent for permitting named executives to have excessive input into setting their own compensation.
(14) Multiple concerns . If the Agent recommends withholding support from compensation committee members in connection with other compensation practices such as tax gross-ups, perquisites, retention or recruitment provisions (including contract length or renewal provisions), guaranteed awards, pensions/SERPs, or severance or termination arrangements, vote FOR such nominees if the issuer has provided adequate rationale and/or disclosure, factoring in any overall adjustments or reductions to the compensation package at issue. Except as otherwise provided for herein, generally DO NOT WITHHOLD support solely due to any single such practice if the total compensation appears reasonable, but consider on a CASE-BY-CASE basis compensation packages representing a combination of such provisions and deemed by the Agent to be excessive.
(15) Commitments . Generally, vote FOR compensation committee members receiving an adverse recommendation from the Agent due to problematic pay practices if the issuer makes a public commitment ( e.g. , via a Form 8-K filing) to rectify the practice on a going-forward basis.
(16) Other . If the Agent has raised other considerations regarding poor compensation practices, consider compensation committee members on a CASE-BY-CASE basis.
Accounting Practices:
(1) Generally, except as otherwise provided for herein, vote FOR independent outside director nominees serving on the audit committee.
(2) Where applicable and except as otherwise provided for herein, generally vote FOR nominees serving on the audit committee, or the companys CEO or CFO if nominated as directors, who did not serve on that committee or have responsibility over the relevant financial function, as applicable, during the majority of the time period relevant to the concerns cited by the Agent.
(3) If the Agent has raised concerns regarding poor accounting practices, consider the companys CEO and CFO, if nominated as directors, and nominees serving on the audit committee on a CASE-BY-CASE basis. Generally vote FOR nominees if the company has taken adequate steps to remediate the concerns cited, which would typically include removing or replacing the responsible executives, and if the concerns are not re-occurring and/or the company has not yet had a full year to remediate the concerns since the time they were identified.
(4) If total non-audit fees exceed the total of audit fees, audit-related fees, and tax compliance and preparation fees, the provisions under Section 3. Auditor Ratification shall apply.
Board Independence:
It shall generally be the policy of the Funds that a board should be majority independent and therefore to consider inside or affiliated outside director nominees when the full board is not majority independent on a CASE-BY-CASE basis. Generally:
(1) WITHHOLD support from the fewest directors whose removal would achieve majority independence across the remaining board, except that support may be withheld from additional nominees whose relative level of independence cannot be differentiated.
(2) WITHHOLD support from all non-independent nominees, including the founder, chairman, or CEO, if the number required to achieve majority independence is equal to or greater than the number of non-independent nominees.
(3) Except as provided above, vote FOR non-independent nominees in the role of CEO, and when appropriate, founder or chairman, and determine support for other non-independent nominees based on the qualifications and contributions of the nominee as well as the Funds voting precedent for assessing relative independence to management, e.g. , insiders holding senior executive positions are deemed less independent than affiliated outsiders with a transactional or advisory relationship to the
company, and affiliated outsiders with a material transactional or advisory relationship are deemed less independent than those with lesser relationships.
(4) Non-voting directors ( e.g. , director emeritus or advisory director) shall be excluded from calculations with respect to majority board independence.
(5) When conditions contributing to a lack of majority independence remain substantially similar to those in the previous year, it shall generally be the policy of the Funds to vote on nominees in a manner consistent with votes cast by the Fund(s) in the previous year.
Generally vote FOR nominees without regard to over-boarding issues raised by the Agent unless other concerns requiring CASE-BY-CASE consideration have been raised.
Generally, when the Agent recommends withholding support due to assessment that a nominee acted in bad faith or against shareholder interests in connection with a major transaction, such as a merger or acquisition, or if the Agent recommends withholding support due to other material failures or egregious actions, consider on a CASE-BY-CASE basis, factoring in the merits of the nominees performance and rationale and disclosure provided. If the Agent cites concerns regarding actions in connection with a candidates service on another board, vote FOR the nominee if the issuer has provided adequate rationale regarding the appropriateness of the nominee to serve on the board under consideration.
Generally, when the Agent recommends withholding support from any nominee due to share pledging concerns, consider on a CASE-BY-CASE basis, factoring in the pledged amount, unwind time, and any historical concerns being raised. Responsibility will generally be assigned to the pledgor, where the pledged amount and unwind time are deemed significant and, therefore, an unnecessary risk to the company.
Performance Test for Directors
Consider nominees failing the Agents performance test, which includes market-based and operating performance measures, on a CASE-BY-CASE basis. Input from the relevant Investment Professional(s) shall be given primary consideration with respect to such proposals.
Support will generally be WITHHELD from nominees receiving a negative recommendation from the Agent due to sustained poor stock performance ( measured by one- and three-year total shareholder returns) combined with multiple takeover defenses/entrenchment devices if the issuer:
(1) Is a controlled company or has a non-shareholder-approved poison pill in place, without provisions to redeem or seek approval in a reasonable period of time; and
(2) Maintains a dual class capital structure, imposes a supermajority vote requirement, or has authority to issue blank check preferred stock.
Nominees receiving a negative recommendation from the Agent due to sustained poor stock performance combined with other takeover defenses/entrenchment devices will be considered on a CASE-BY-CASE basis.
Proposals Regarding Board Composition or Board Service
Generally, except as otherwise provided for herein, vote AGAINST shareholder proposals to impose new board structures or policies, including those requiring that the positions of chairman
and CEO be held separately, but vote FOR proposals in connection with a binding agreement or other legal requirement to which an issuer has or reasonably may expect to become subject, and consider such proposals on a CASE-BY-CASE basis if the board is not majority independent or corporate governance concerns have been identified. Generally, except as otherwise provided for herein, vote FOR management proposals to adopt or amend board structures or policies, except consider such proposals on a CASE-BY-CASE basis if the board is not majority independent, corporate governance concerns have been identified, or the proposal may result in a material reduction in shareholders rights.
Generally, vote AGAINST shareholder proposals:
· Asking that more than a simple majority of directors be independent.
· Asking that the independence of the compensation and/or nominating committees be greater than that required by the listing exchange.
· Limiting the number of public company boards on which a director may serve.
· Seeking to redefine director independence or directors specific roles ( e.g. , responsibilities of the lead director).
· Requesting creation of additional board committees or offices, except as otherwise provided for herein.
· Limiting the tenure of outside directors or imposing a mandatory retirement age for outside directors (unless the proposal seeks to relax existing standards), but generally vote FOR management proposals in this regard.
Generally, vote FOR shareholder proposals that seek creation of an audit, compensation, or nominating committee of the board, unless the committee in question is already in existence or the issuer has availed itself of an applicable exemption of the listing exchange ( e.g. , performance of relevant functions by a majority of independent directors in lieu of the formation of a separate committee).
Stock Ownership Requirements
Generally, vote AGAINST shareholder proposals requiring directors to own a minimum amount of company stock in order to qualify as a director or to remain on the board.
Director and Officer Indemnification and Liability Protection
Proposals on director and officer indemnification and liability protection should be evaluated on a CASE-BY-CASE basis, using Delaware law as the standard. Vote AGAINST proposals to limit or eliminate entirely directors and officers liability for monetary damages for violating the duty of care. Vote AGAINST indemnification proposals that would expand coverage beyond just legal expenses to acts, such as negligence, that are more serious violations of fiduciary obligation than mere carelessness. Vote FOR only those proposals providing such expanded coverage in cases when a directors or officers legal defense was unsuccessful if:
(1) The director was found to have acted in good faith and in a manner that he reasonably believed was in the best interests of the company; and
(2) Only if the directors legal expenses would be covered.
2. Proxy Contests
These proposals should generally be analyzed on a CASE-BY-CASE basis. Input from the relevant Investment Professional(s) shall be given primary consideration with respect to proposals in connection with proxy contests being considered on behalf of that Fund.
Voting for Director Nominees in Contested Elections
Votes in a contested election of directors must be evaluated on a CASE-BY-CASE basis.
Reimburse Proxy Solicitation Expenses
Voting to reimburse proxy solicitation expenses should be analyzed on a CASE-BY-CASE basis, generally voting FOR if associated nominees are also supported.
3. Auditors
Ratifying Auditors
Generally, except in cases of poor accounting practices or high non-audit fees, vote FOR management proposals to ratify auditors. Consider management proposals to ratify auditors on a CASE-BY-CASE basis if the Agent cites poor accounting practices. If fees for non-audit services exceed 50 percent of total auditor fees as described below, consider on a CASE-BY-CASE basis, voting AGAINST management proposals to ratify auditors only if concerns exist that remuneration for the non-audit work is so lucrative as to taint the auditors independence. For purposes of this review, fees deemed to be reasonable, generally non-recurring exceptions to the non-audit fee category ( e.g. , those related to an IPO) shall be excluded. Generally vote FOR shareholder proposals asking the issuer to present its auditor annually for ratification.
Auditor Independence
Generally, consider shareholder proposals asking companies to prohibit their auditors from engaging in non-audit services (or capping the level of non-audit services) on a CASE-BY-CASE basis.
Audit Firm Rotation
Generally, vote AGAINST shareholder proposals asking for mandatory audit firm rotation.
4. Proxy Contest Defenses
Presentation of management and shareholder proposals on the same matter on the same agenda shall not require a Fund to vote FOR one and AGAINST the other.
Board Structure: Staggered vs. Annual Elections
Generally, vote AGAINST proposals to classify the board or otherwise restrict shareholders ability to vote upon directors and FOR proposals to repeal classified boards and to elect all directors annually.
Shareholder Ability to Remove Directors
Generally, vote AGAINST proposals that provide that directors may be removed only for cause.
Generally, vote FOR proposals to restore shareholder ability to remove directors with or without cause.
Generally, vote AGAINST proposals that provide that only continuing directors may elect replacements to fill board vacancies.
Generally, vote FOR proposals that permit shareholders to elect directors to fill board vacancies.
Cumulative Voting
If the company is controlled or maintains a classified board of directors or a dual class voting structure, generally, vote AGAINST management proposals to eliminate cumulative voting (except that such proposals may be supported irrespective of classification in furtherance of an issuers plan to declassify its board or adopt a majority voting standard), and vote FOR shareholder proposals to restore or permit cumulative voting.
Time-Phased Voting
Generally, vote AGAINST proposals to implement, and FOR proposals to eliminate, time-phased or other forms of voting that do not promote a one share, one vote standard.
Shareholder Ability to Call Special Meetings
Generally, vote FOR shareholder proposals that provide shareholders with the ability to call special meetings when either (1) the company does not currently permit shareholders to do so or (2) the existing ownership threshold is greater than 25 percent.
Consider management proposals to permit shareholders to call special meetings on a CASE-BY-CASE basis, generally voting FOR such proposals not opposed by the Agent. Generally vote FOR such proposals if the Agents sole concern relates to a net-long position requirement.
Shareholder Ability to Act by Written Consent
Generally, vote AGAINST shareholder proposals seeking the right to act by written consent if the issuer:
(1) Permits shareholders to call special meetings;
(2) Does not impose supermajority vote requirements; and
(3) Has otherwise demonstrated its accountability to shareholders ( e.g. , the company has reasonably addressed majority-supported shareholder proposals).
Consider management proposals to eliminate the right to act by written consent on a CASE-BY-CASE basis, generally voting FOR if the above conditions are present.
Generally, vote FOR shareholder proposals seeking the right to act by written consent if the above conditions are not present.
Shareholder Ability to Alter the Size of the Board
Generally, vote FOR proposals that seek to fix the size of the board or designate a range for its size.
Generally, vote AGAINST proposals that give management the ability to alter the size of the board outside of a specified range without shareholder approval.
5. Tender Offer Defenses
Poison Pills
Generally, vote FOR shareholder proposals that ask a company to submit its poison pill for
shareholder ratification, or to redeem its pill in lieu thereof, unless (1) shareholders have approved adoption of the plan, (2) a policy has already been implemented by the company that should reasonably prevent abusive use of the pill, or (3) the board had determined that it was in the best interest of shareholders to adopt a pill without delay, provided that such plan would be put to shareholder vote within twelve months of adoption or expire, and if not approved by a majority of the votes cast, would immediately terminate.
Review on a CASE-BY-CASE basis shareholder proposals to redeem a companys poison pill.
Review on a CASE-BY-CASE basis management proposals to approve or ratify a poison pill or any plan or charter amendment ( e.g. , investment restrictions) that can reasonably be construed as an anti-takeover measure, with voting decisions generally based on the Agents approach to evaluating such proposals, considering factors such as rationale, trigger level, and sunset provisions. Votes will generally be cast in a manner that seeks to preserve shareholder value and the right to consider a valid offer, voting AGAINST management proposals in connection with poison pills or anti-takeover activities that do not meet the Agents standards.
Fair Price Provisions
Vote proposals to adopt fair price provisions on a CASE-BY-CASE basis.
Generally, vote AGAINST fair price provisions with shareholder vote requirements greater than a majority of disinterested shares.
Greenmail
Generally, vote FOR proposals to adopt anti-greenmail charter or bylaw amendments or otherwise restrict a companys ability to make greenmail payments.
Review on a CASE-BY-CASE basis anti-greenmail proposals when they are bundled with other charter or bylaw amendments.
Pale Greenmail
Review on a CASE-BY-CASE basis restructuring plans that involve the payment of pale greenmail.
Unequal Voting Rights
Generally, except as otherwise provided for herein, vote AGAINST dual-class exchange offers and dual-class recapitalizations.
Supermajority Shareholder Vote Requirement
Generally, vote AGAINST proposals to require a supermajority shareholder vote and FOR management or shareholder proposals to lower supermajority shareholder vote requirements, unless, for companies with shareholder(s) with significant ownership levels, the Agent recommends retention of existing supermajority requirements in order to protect minority shareholder interests.
White Squire Placements
Generally, vote FOR shareholder proposals to require approval of blank check preferred stock issues for other than general corporate purposes.
6. Miscellaneous
Amendments to Corporate Documents
Except to align with legislative or regulatory changes or when support is recommended by the Agent or relevant Investment Professional(s) (including, for example, as a condition to a major transaction such as a merger), generally, vote AGAINST proposals seeking to remove shareholder approval requirements or otherwise remove or diminish shareholder rights, e.g. , by (1) adding restrictive provisions, (2) removing provisions or moving them to portions of the charter not requiring shareholder approval, or (3) in corporate structures such as holding companies, removing provisions in an active subsidiarys charter that provide voting rights to parent company shareholders. This policy would also generally apply to proposals seeking approval of corporate agreements or amendments to such agreements that the Agent recommends AGAINST because a similar reduction in shareholder rights is requested.
Generally, vote AGAINST proposals for charter amendments that support board entrenchment or may be used as an anti-takeover device (or to further anti-takeover conditions), particularly if the proposal is bundled or the board is classified.
Generally, vote FOR proposals seeking charter or bylaw amendments to remove anti-takeover provisions.
Consider proposals seeking charter or bylaw amendments not addressed under these Guidelines on a CASE-BY-CASE basis.
Confidential Voting
Generally, vote FOR shareholder proposals that request companies to adopt confidential voting, use independent tabulators, and use independent inspectors of election as long as the proposals include clauses for proxy contests as follows:
· In the case of a contested election, management should be permitted to request that the dissident group honor its confidential voting policy.
· If the dissidents agree, the policy remains in place.
· If the dissidents do not agree, the confidential voting policy is waived.
Generally, vote FOR management proposals to adopt confidential voting.
Proxy Access
Consider on a CASE-BY-CASE basis proposals to provide shareholders with access to managements proxy material in order to nominate their own candidates(s) to the board. Generally, vote AGAINST shareholder proposals, unless significant or multiple corporate governance concerns have been identified. Generally, vote FOR management proposals also supported by the Agent.
Majority Voting Standard
Generally, vote FOR proposals seeking election of directors by the affirmative vote of the majority of votes cast in connection with a meeting of shareholders, provided they contain a plurality carve-out for contested elections, and provided such standard does not conflict with state law in which the company is incorporated. Generally, vote FOR amendments to corporate documents or other actions in furtherance of a majority standard. (See also Section 11. Mutual Fund Proxies.)
Bundled Proposals
Except as otherwise provided for herein, review on a CASE-BY-CASE basis bundled or conditioned proxy proposals, generally voting AGAINST bundled proposals containing one or more items not supported under these Guidelines if the Agent or relevant Investment Professional(s) deems the negative impact, on balance, to outweigh any positive impact.
Moot Proposals
Generally, vote with the Agents recommendation to withhold support (AGAINST or ABSTAIN, as appropriate) from a proposal for which support has become moot ( e.g. , an incentive grant to a person no longer employed by the company.)
Shareholder Advisory Committees
Review on a CASE-BY-CASE basis proposals to establish a shareholder advisory committee.
Reimburse Shareholder for Expenses Incurred
Voting to reimburse expenses incurred in connection with shareholder proposals should be analyzed on a CASE-BY-CASE basis.
Other Business
In connection with proxies of U.S. issuers ( e.g. , those filing a DEF 14A and considered domestic by the Agent), generally vote FOR management proposals for Other Business, except when the primary proposal is not supported by a Fund or in connection with a proxy contest in which a Fund is not voting in support of management.
Quorum Requirements
Review on a CASE-BY-CASE basis proposals to lower quorum requirements for shareholder meetings below a majority of the shares outstanding.
Advance Notice for Shareholder Proposals
Generally, vote FOR management proposals related to advance notice period requirements, provided that the period requested is in accordance with applicable law and no material governance concerns have been identified in connection with the issuer.
Multiple Proposals
Multiple proposals of a similar nature presented as options to the course of action favored by management may all be voted FOR, provided that support for a single proposal is not operationally required, no one proposal is deemed superior in the interest of the Fund(s), and each proposal would otherwise be supported under these Guidelines.
7. Capital Structure
Common Stock Authorization
Review proposals to increase the number of shares of common stock authorized for issuance on a CASE-BY-CASE basis. Except where otherwise indicated, the Agents proprietary approach of determining appropriate thresholds and, for requests above such allowable threshold, applying a company-specific, qualitative review ( e.g. , considering rationale and prudent historical usage), will generally be utilized in evaluating such proposals.
Generally, vote FOR:
· Proposals to authorize capital increases within the Agents allowable thresholds or those in excess but meeting Agents qualitative standards, but consider on a CASE-BY-CASE basis those requests failing the Agents review for proposals in connection with which a contrary recommendation from the relevant Investment Professional(s) has been received and is to be utilized ( e.g., in support of a merger or acquisition proposal).
· Proposals to authorize capital increases within the Agents allowable thresholds or those in excess but meeting Agents qualitative standards, unless the company states that the stock may be used as a takeover defense. In those cases, consider on a CASE-BY-CASE basis if a contrary recommendation from the relevant Investment Professional(s) has been received and is to be utilized.
· Proposals to authorize capital increases exceeding the Agents thresholds when a companys shares are in danger of being delisted or if a companys ability to continue to operate as a going concern is uncertain.
Generally, vote AGAINST:
· Proposals to increase the number of authorized shares of a class of stock if the issuance which the increase is intended to service is not supported under these Guidelines.
· Nonspecific proposals authorizing excessive discretion to a board.
Consider management proposals to make changes to the capital structure not otherwise addressed under these Guidelines CASE-BY-CASE, generally voting with the Agents recommendation unless a contrary recommendation has been received from the relevant Investment Professional(s) and is to be utilized.
Dual Class Capital Structures
Generally, vote AGAINST:
· Proposals to create or perpetuate dual class capital structures unless supported by the Agent ( e.g. , to avert bankruptcy or generate non-dilutive financing, and not designed to increase the voting power of an insider or significant shareholder).
· Proposals to increase the number of authorized shares of the class of stock that has superior voting rights in companies that have dual class capital structures.
However, consider such proposals CASE-BY-CASE if (1) bundled with favorable proposal(s), (2) approval of such proposal(s) is a condition of such favorable proposal(s), or (3) part of a recapitalization for which support is recommended by the Agent or relevant Investment Professional(s).
Consider management proposals to eliminate or make changes to dual class capital structures CASE-BY-CASE, generally voting with the Agents recommendation unless a contrary recommendation has been received from the relevant Investment Professional(s) and is to be utilized.
Generally, vote FOR shareholder proposals to eliminate dual class capital structures unless the relevant Fund owns a class with superior voting rights.
Stock Distributions: Splits and Dividends
Generally, vote FOR management proposals to increase common share authorization for a stock split, provided that the increase in authorized shares falls within the Agents allowable thresholds, but consider on a CASE-BY-CASE basis those proposals exceeding the Agents threshold for proposals in connection with which a contrary recommendation from the relevant Investment Professional(s) has been received and is to be utilized.
Reverse Stock Splits
Consider on a CASE-BY-CASE basis management proposals to implement a reverse stock split. In the event the split constitutes a capital increase effectively exceeding the Agents allowable threshold because the request does not proportionately reduce the number of shares authorized, consider managements rationale and/or disclosure, generally voting FOR, but generally not supporting additional requests for capital increases on the same agenda.
Preferred Stock
Review proposals to increase the number of shares of preferred stock authorized for issuance on a CASE-BY-CASE basis, and except where otherwise indicated, generally utilize the Agents approach for evaluating such proposals. This approach incorporates both qualitative and quantitative measures, including a review of past performance ( e.g. , board governance, shareholder returns and historical share usage) and the current request ( e.g. , rationale, whether shares are blank check and declawed, and dilutive impact as determined through the Agents proprietary model for assessing appropriate thresholds).
Generally, vote AGAINST proposals authorizing the issuance of preferred stock or creation of new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights (blank check preferred stock), but vote FOR if the Agent or relevant Investment Professional(s) so recommends because the issuance is required to effect a merger or acquisition proposal.
Generally, vote FOR proposals to issue or create blank check preferred stock in cases when the company expressly states that the stock will not be used as a takeover defense. Generally vote AGAINST in cases where the company expressly states that, or fails to disclose whether, the stock may be used as a takeover defense, but vote FOR if the Agent or relevant Investment Professional(s) so recommends because the issuance is required to address special circumstances such as a merger or acquisition.
Generally, vote FOR proposals to authorize or issue preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable.
Vote CASE-BY-CASE on proposals to increase the number of blank check preferred shares after analyzing the number of preferred shares available for issue given a companys industry and performance in terms of shareholder returns.
Shareholder Proposals Regarding Blank Check Preferred Stock
Generally, vote FOR shareholder proposals to have blank check preferred stock placements, other than those shares issued for the purpose of raising capital or making acquisitions in the normal course of business, submitted for shareholder ratification.
Adjustments to Par Value of Common Stock
Generally, vote FOR management proposals to reduce the par value of common stock, unless doing so raises other concerns not otherwise supported under these Guidelines.
Preemptive Rights
Review on a CASE-BY-CASE basis shareholder proposals that seek preemptive rights or management proposals that seek to eliminate them. In evaluating proposals on preemptive rights, consider the size of a company and the characteristics of its shareholder base.
Debt Restructurings
Review on a CASE-BY-CASE basis proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan.
Share Repurchase Programs
Generally, vote FOR management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms, but vote AGAINST plans with terms favoring selected parties. This policy shall also apply to companies incorporated outside the U.S. if they are listed on a U.S. exchange and treated as a U.S. domestic issuer by the Securities and Exchange Commission (SEC).
Generally, vote FOR management proposals to cancel repurchased shares.
Generally, vote AGAINST proposals for share repurchase methods lacking adequate risk mitigation or exceeding appropriate volume or duration parameters for the market.
Consider shareholder proposals seeking share repurchase programs on a CASE-BY-CASE basis, with input from the relevant Investment Professional(s) to be given primary consideration.
Tracking Stock
Votes on the creation of tracking stock are determined on a CASE-BY-CASE basis.
8. Executive and Director Compensation
Except as otherwise provided for herein, votes with respect to compensation and employee benefit plans, or the issuance of shares in connection with such plans, should be determined on a CASE-BY-CASE basis, with voting decisions generally based on the Agents approach to evaluating such plans, which includes determination of costs and comparison to an allowable cap, except as otherwise provided herein.
· Generally, vote in accordance with the Agents recommendations FOR equity-based plans with costs within such cap and AGAINST those with costs in excess of it, except
that plans above the cap may be supported if so recommended by the Agent or relevant Investment Professional(s) as a condition to a major transaction such as a merger.
· Generally, vote AGAINST plans if the Agent suggests cost or dilution assessment may not be possible due to the method of disclosing shares allocated to the plan(s).
· Generally, vote AGAINST equity-based plans whose awards further a misalignment between CEO pay and performance with regard to shareholder value, including where pay appears unreasonably insulated from performance conditions and/or awards under the plan are concentrated among named executive officers.
· Generally, vote AGAINST plans with inadequate disclosure regarding vesting or performance requirements. However, except as otherwise provided herein, consider plans CASE-BY-CASE if the Agent questions the form or stringency of the vesting or performance criteria.
· Generally, vote FOR plans with costs within the cap if the primary concerns raised by the Agent pertain to matters that would not result in a negative vote under these Guidelines on a management say on pay proposal or the relevant board or committee member(s).
· Generally, vote AGAINST plans administered by potential grant recipients.
· Generally, vote AGAINST proposals to eliminate existing shareholder approval requirements for material plan changes, unless the company has provided a reasonable rationale and/or adequate disclosure regarding the requested changes.
· Generally vote AGAINST long-term incentive plans that are inadequately aligned with shareholders because the performance period is too short or they lack an appropriate equity component, except that such cases will be considered CASE-BY-CASE in connection with executives already holding significant equity positions.
· Generally, vote AGAINST plans that contain an overly liberal change in control definition ( e.g. , does not result in actual change in control or results in a change in control but does not terminate the employment relationship).
· Consider plans CASE-BY-CASE if the Agent raises other considerations not otherwise provided for herein.
Management Proposals Seeking Approval to Reprice Options
Review on a CASE-BY-CASE basis management proposals seeking approval to reprice, replace, or exchange options, considering factors such as rationale, historic trading patterns, value-for-value exchange, vesting periods, and replacement option terms. Generally, vote FOR proposals that meet the Agents criteria for acceptable repricing, replacement, or exchange transactions. Generally, vote AGAINST compensation plans that (1) permit or may permit ( e.g. , history of repricing and no express prohibition against future repricing) repricing of stock options, or any form or alternative to repricing, without shareholder approval, (2) include provisions that permit repricing, replacement, or exchange transactions that do not meet the Agents criteria, or (3) give the board sole discretion to approve option repricing, replacement, or exchange programs.
Director Compensation
Votes on stock-based plans for directors are made on a CASE-BY-CASE basis, with voting decisions generally based on the Agents quantitative approach described above as well as a review of qualitative features of the plan when costs exceed the Agents threshold.
Employee Stock Purchase Plans
Votes on employee stock purchase plans, and capital issuances in support of such plans, should be made on a CASE-BY-CASE basis, with voting decisions generally based on the Agents approach to evaluating such plans.
OBRA-Related Compensation Proposals
Votes on plans intended to qualify for favorable tax treatment under the provisions of Section 162(m) of OBRA should be evaluated irrespective of the Agents assessment of board independence, provided that the board meets the independence requirements of the relevant listing exchange and no potential recipient under the plan(s) sits on the committee that exercises discretion over the related compensation awards. Unless the issuer has provided a compelling rationale, generally vote with the Agents recommendations AGAINST plans that include practices or features not supported under these Guidelines or deliver excessive compensation that fails to qualify for favorable tax treatment.
Amendments that Place a Cap on Annual Grants or Amend Administrative Features
Generally, vote FOR plans that simply amend shareholder-approved plans to include administrative features or place a cap on the annual grants any one participant may receive to comply with the provisions of Section 162(m) of OBRA.
Amendments to Add Performance-Based Goals
Generally, vote FOR amendments to add performance goals to existing compensation plans to comply with the provisions of Section 162(m) of OBRA, unless they are clearly inappropriate.
Amendments to Increase Shares and Retain Tax Deductions Under OBRA
Votes on amendments to existing plans to increase shares reserved and to qualify the plan for favorable tax treatment under the provisions of Section 162(m) should be evaluated on a CASE-BY-CASE basis, generally voting FOR such plans that do not raise any negative concerns under these Guidelines.
Approval of Cash or Cash-and-Stock Bonus Plans
Generally, vote FOR cash or cash-and-stock bonus plans to exempt the compensation from taxes under the provisions of Section 162(m) of OBRA, with primary consideration given to managements assessment that such plan meets the requirements for exemption of performance-based compensation. However, consider CASE-BY-CASE when broader compensation concerns exist.
Shareholder Proposals Regarding Executive and Director Pay
Unless evidence exists of abuse in historical compensation practices, and except as otherwise provided for herein, generally vote AGAINST shareholder proposals that seek to impose new compensation structures or policies.
Severance and Termination Payments
Generally, vote FOR shareholder proposals to have parachute arrangements submitted for shareholder ratification (with parachutes defined as compensation arrangements related to termination that specify change in control events) and provided that the proposal does not include unduly restrictive or arbitrary provisions such as advance approval requirements.
Generally, vote FOR shareholder proposals seeking double triggers on change in control cash severance provisions.
Consider on a CASE-BY-CASE basis proposals seeking a specific treatment ( e.g. , double trigger or pro-rata) of equity that vests upon change in control. Generally vote FOR management proposals, unless evidence exists of abuse in historical compensation practices. Generally vote AGAINST shareholder proposals regarding the treatment of equity if the change in control cash severance provisions are double-triggered and the company has provided a reasonable rationale regarding the treatment of equity.
Generally vote FOR shareholder proposals to submit executive severance agreements for shareholder ratification, if such proposals specify change in control events, Supplemental Executive Retirement Plans, or deferred executive compensation plans, or if ratification is required by the listing exchange.
Review on a CASE-BY-CASE basis all proposals to approve, ratify, or cancel executive severance or termination arrangements, including those related to executive recruitment or retention. Generally vote FOR such compensation arrangements if:
(1) The primary concerns raised by the Agent would not result in a negative vote under these Guidelines on a management say on pay proposal or the relevant board or committee member(s);
(2) The issuer has provided adequate rationale and/or disclosure; or
(3) Support is recommended by the Agent or relevant Investment Professional(s) ( e.g. , as a condition to a major transaction such as a merger).
However, vote in accordance with the Agents recommendations AGAINST new or materially amended plans, contracts, or payments that include single trigger change in control cash severance provisions or do not require an actual change in control in order to be triggered.
Consider on a CASE-BY-CASE basis any parachute arrangement proposals opposed by the Agent due to single trigger equity acceleration or legacy single trigger change in control cash severance provisions. Generally vote FOR such proposals, unless: (1) the total payout to the named executive officers is deemed excessive versus the transaction equity value of the merger, (2) the single-triggered component of the payout is excessive versus the total payout, or (3) the arrangements contain an overly liberal change in control definition.
Employee Stock Ownership Plans (ESOPs)
Generally, vote FOR proposals that request shareholder approval in order to implement an ESOP or to increase authorized shares for existing ESOPs, except in cases when the number of shares allocated to the ESOP is excessive ( i.e. , generally greater than five percent of outstanding shares).
401(k) Employee Benefit Plans
Generally, vote FOR proposals to implement a 401(k) savings plan for employees.
Holding Periods
Generally, vote AGAINST proposals requiring mandatory periods for officers and directors to hold company stock.
Advisory Votes on Executive Compensation (Say on Pay)
Generally, management proposals seeking ratification of the companys compensation program will be voted FOR unless the program includes practices or features not supported under these Guidelines (including those referenced under Section 1. The Board of Directors, Compensation Practices) and the proposal receives a negative recommendation from the Agent. Unless otherwise provided for herein, proposals not receiving the Agents support due to concerns regarding incentive structures, severance/termination payments, or vesting or performance criteria not otherwise supported by these Guidelines will be considered on a CASE-BY-CASE basis, factoring in whether the issuer has made improvements to its overall compensation program, and generally voting FOR if CEO pay appears aligned with performance and/or the company has provided a reasonable rationale and/or adequate disclosure regarding the matter(s) under consideration. For say on pay proposals not supported by the Agent and referencing incentive plan concerns:
(1) Short-term incentive plans : Proposals will be considered on a CASE-BY-CASE basis if they cite short-term incentive plans over which the board has exercised discretion to exclude extraordinary items, and voted AGAINST if treatment of such items has been inconsistent ( e.g. , exclusion of losses but not gains).
(2) Long-term incentive plans : Proposals will be voted AGAINST if they cite long-term incentive plans that are inadequately aligned with shareholders because the performance period is too short or they lack an appropriate equity component ( e.g., overly cash-based plans), except that the latter will be considered CASE-BY-CASE in connection with executives already holding significant equity positions.
Generally, vote AGAINST proposals when named executives have material input into setting their own compensation.
Generally, vote AGAINST proposals presented by issuers subject to Troubled Asset Relief Program (TARP) provisions if there is inadequate discussion of the process for ensuring that incentive compensation does not encourage excessive risk-taking.
Frequency of Advisory Votes on Executive Compensation
Generally, support proposals seeking an annual say on pay and oppose those seeking a less frequent say on pay.
9. State of Incorporation
Voting on State Takeover Statutes
Review on a CASE-BY-CASE basis proposals to opt in or out of state takeover statutes (including control share acquisition statutes, control share cash-out statutes, freezeout provisions, fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions, anti-greenmail provisions, and disgorgement provisions).
Voting on Reincorporation Proposals
Proposals to change a companys state of incorporation should be examined on a CASE-BY-CASE basis, generally supporting management proposals not assessed as a (1) potential takeover defense or (2) significant reduction of minority shareholder rights that outweigh the aggregate positive impact, but if so assessed, weighing managements rationale for the change. Generally, vote FOR management reincorporation proposals upon which another key proposal, such as a merger transaction, is contingent if the other key proposal is also supported. Generally, vote AGAINST shareholder reincorporation proposals not also supported by the company.
10. Mergers and Corporate Restructurings
Input from the relevant Investment Professional(s) shall be given primary consideration with respect to proposals regarding business combinations, particularly those between otherwise unaffiliated parties, or other corporate restructurings being considered on behalf of that Fund.
Generally, vote FOR a proposal not typically supported under these Guidelines if a key proposal, such as a merger transaction, is contingent upon its support and a vote FOR is accordingly recommended by the Agent or relevant Investment Professional(s).
Mergers and Acquisitions
Votes on mergers and acquisitions should be considered on a CASE-BY-CASE basis, with voting decisions generally based on the Agents approach to evaluating such proposals if no input is provided by the relevant Investment Professional(s).
Corporate Restructurings
Votes on corporate restructuring proposals, including demergers, minority squeezeouts, leveraged buyouts, spinoffs, liquidations, dispositions, divestitures, and asset sales, should be considered on a CASE-BY-CASE basis, with voting decisions generally based on the Agents approach to evaluating such proposals if no input is provided by the relevant Investment Professional(s).
Adjournment
Generally, vote FOR proposals to adjourn a meeting to provide additional time for vote solicitation when the primary proposal, such as a merger or corporate restructuring, is also supported. Absent such a proposal, vote FOR adjournment if all other proposals are supported and AGAINST if all others are opposed. Under any other circumstances, consider on a CASE-BY-CASE basis.
Appraisal Rights
Generally, vote FOR proposals to restore, or provide shareholders with, rights of appraisal.
Changing Corporate Name
Generally, vote FOR changing the corporate name.
11. Mutual Fund Proxies
Approving New Classes or Series of Shares
Generally, vote FOR the establishment of new classes or series of shares.
Authorizing the Board to Hire and Terminate Sub-Advisers Without Shareholder Approval
Generally, vote FOR these proposals.
Master-Feeder Structure
Generally, vote FOR the establishment of a master-feeder structure.
Establish Director Ownership Requirement
Generally, vote AGAINST shareholder proposals for the establishment of a director ownership requirement.
The matters below should be examined on a CASE-BY-CASE basis:
· Election of Directors
· Converting Closed-end Fund to Open-end Fund
· Proxy Contests
· Investment Advisory Agreements
· Preferred Stock Proposals
· 1940 Act Policies
· Changing a Fundamental Restriction to a Nonfundamental Restriction
· Change Fundamental Investment Objective to Nonfundamental
· Name Rule Proposals
· Disposition of Assets/Termination/Liquidation
· Changes to the Charter Document
· Changing the Domicile of a Fund
· Change in Funds Subclassification
· Distribution Agreements
· Mergers
· Reimburse Shareholder for Expenses Incurred
· Terminate the Investment Adviser
· Majority Voting Proposals
12. Social and Environmental Issues
Boards of directors and company management are responsible for guiding the corporation in connection with matters that are most often the subject of shareholder proposals on social and environmental issues: ensuring that the companies they oversee comply with applicable legal, regulatory and ethical standards, effectively managing risk, and assessing and addressing matters that may have a financial impact on shareholder value. The Funds will generally vote in accordance with the boards recommendation on such proposals unless it appears both that the stewardship noted above has fallen short and the issue is material to the company. The former may be evidenced by the companys failure to align its actions and disclosure with market practice and that of its peers, or the companys having been subject to significant controversies, litigation, fines, or penalties in connection with the relevant issue. Such instances will be considered CASE-BY-CASE. The Funds will generally vote AGAINST shareholder proposals
seeking to dictate corporate conduct, impose excessive costs or restrictions, duplicate policies already substantially in place, or release information that would not help a shareholder evaluate an investment in the corporation as an economic matter. The Funds may ABSTAIN from voting on shareholder proposals where application of the Guidelines is unclear. This may include cases where the concerns raised are considered valid but the policies or actions requested are not deemed appropriate or the issues are not clearly relevant to corporate performance or are not deemed appropriate for shareholder consideration.
13. Global Proxies
Companies incorporated outside the U.S. shall generally be subject to the foregoing U.S. Guidelines if they are listed on a U.S. exchange and treated as a U.S. domestic issuer by the SEC. Where applicable and not provided for otherwise herein, certain U.S. Guidelines may also be applied to companies incorporated outside the U.S., e.g. , companies with a significant base of U.S. operations and employees. However, the following provide for differing regulatory and legal requirements, market practices, and political and economic systems existing in various global markets.
Unless otherwise provided for herein, it shall generally be the policy of the Funds to vote AGAINST global proxy proposals when the Agent recommends voting AGAINST such proposal because relevant disclosure by the issuer, or the time provided for consideration of such disclosure, is inadequate. For purposes of these global Guidelines, AGAINST shall mean withholding of support for a proposal, resulting in submission of a vote of AGAINST or ABSTAIN, as appropriate for the given market and level of concern raised by the Agent regarding the issue or lack of disclosure or time provided.
In connection with practices described herein that are associated with a firm AGAINST vote, it shall generally be the policy of the Funds to consider them on a CASE-BY-CASE basis if the Agent recommends their support (1) as the issuer or market transitions to better practices ( e.g. , having committed to new regulations or governance codes) or (2) as the more favorable choice when shareholders must choose between alternate proposals.
Routine Management Proposals
Generally, vote FOR the following and other similar routine management proposals:
· the opening of the shareholder meeting
· that the meeting has been convened under local regulatory requirements
· the presence of quorum
· the agenda for the shareholder meeting
· the election of the chair of the meeting
· the appointment of shareholders to co-sign the minutes of the meeting
· regulatory filings ( e.g. , to effect approved share issuances)
· the designation of inspector or shareholder representative(s) of minutes of meeting
· the designation of two shareholders to approve and sign minutes of meeting
· the allowance of questions
· the publication of minutes
· the closing of the shareholder meeting
Consider proposals seeking authority to call shareholder meetings on less than 21 days notice on a CASE-BY-CASE basis, with voting decisions generally based on the Agents approach to consider whether the issuer has provided clear disclosure of its compliance with any hurdle conditions for the authority imposed by applicable law and has historically limited its use of such authority to time-sensitive matters.
Discharge of Management/Supervisory Board Members
Generally, vote FOR management proposals seeking the discharge of management and supervisory board members, unless the Agent recommends AGAINST due to concern about the past actions of the companys auditors or directors or legal action is being taken against the board by other shareholders, including when the proposal is bundled. Generally do not withhold support from such proposals in connection with remuneration practices otherwise supported under these Guidelines or as a means of expressing disapproval of broader practices of the issuer or its board.
Director Elections
Unless otherwise provided for herein, the Agents standards with respect to determining director independence shall apply. These standards generally provide that, to be considered completely independent, a director shall have no material connection to the company other than the board seat.
Agreement with the Agents independence standards shall not dictate that a Funds vote shall be cast according to the Agents corresponding recommendation. Further, unless otherwise provided for herein, the application of Guidelines in connection with such standards shall apply only when the nominees level of independence can be ascertained based on available disclosure. These policies generally apply to director nominees in uncontested elections; votes in contested elections, and votes on director nominees not subject to policies described herein, should be made on a CASE-BY-CASE basis, with primary consideration in contested elections given to input from the relevant Investment Professional(s).
For issuers domiciled in Finland, France, Ireland, the Netherlands, Sweden, or tax haven markets, generally vote AGAINST non-independent directors opposed by the Agent when the full board serves as the audit committee, or the company does not have an audit committee.
For issuers in all markets, vote AGAINST non-independent nominees to the audit committee, as well as bundled slates including such nominees, unless the Agent otherwise recommends support ( e.g. , due to market practices or requirements). If the slate is bundled and audit committee membership is unclear or proposed as a separate agenda item, vote FOR if the Agent otherwise recommends support. For Canadian issuers, the Funds U.S. Guidelines with respect to audit committees shall apply. For issuers in all markets, nominees (or slates of nominees) will be voted AGAINST if opposed by the Agent for failing to disclose audit fees broken down by category. If the Agent opposes audit committee members because fees for non-audit services (excluding significant, one-time events) exceed 50 percent of total auditor fees, the provisions under Section 13. Ratification of Auditors and Approval of Auditors Fees shall apply.
Generally, vote FOR non-independent directors when the full board serves as the remuneration (compensation) or nominating committee, or the company does not have a remuneration or nominating committee, if the board meets the applicable independence requirements of the relevant listing exchange. Vote FOR non-independent directors who sit on the remuneration or
nominating committees if such committee meets the applicable independence requirements of the relevant listing exchange.
Generally follow the Agents recommendations to vote AGAINST individuals nominated as outside/non-executive directors who do not meet the Agents standard for independence, unless the slate of nominees is bundled and includes independent nominees, in which case the proposal(s) to elect board members shall be considered on a CASE-BY-CASE basis.
Generally follow the Agents standards for withholding support (AGAINST or ABSTAIN, as appropriate) from bundled slates or non-independent directors (typically, but not always, excluding the CEO), as applicable, if the board does not meet the Agents independence standards or the boards independence cannot be ascertained due to inadequate disclosure.
For issuers in Italy presenting multiple slates of directors ( voto di lista ), generally withhold support (AGAINST or ABSTAIN, as appropriate) from all slates until nominee names are disclosed, and upon disclosure, generally follow the Agents standards for assessing which slate is best suited to represent shareholder interests.
For issuers in Japan, generally follow the Agents recommendations in furtherance of greater board independence and minority shareholder protections, including:
· At companies with controlling shareholders, if the board after the shareholder meeting does not include at least two directors deemed independent under the Agents standards, generally vote AGAINST reelection of top executives.
· At companies with a three-committee structure, generally vote AGAINST (1) outside director nominees not deemed independent under the Agents standards if the board after the shareholder meeting is not majority independent and (2) non-independent directors on the nominating committee if the board does not include at least two directors deemed independent under the Agents standards.
· At all companies, vote AGAINST the top executive if the board does not include at least one outside director.
Consider on a CASE-BY-CASE basis any nominee whom the Agent cites as having failed to implement a majority-approved shareholder proposal. Vote FOR if the shareholder proposal has been reasonably addressed. Vote AGAINST if the shareholder proposal is supported under these Guidelines and the board has not disclosed a credible rationale for not implementing the proposal.
Generally, withhold support (AGAINST or ABSTAIN, as appropriate) from nominees or slates of nominees opposed by the Agent because they are presented in a manner not aligned with market best practice and/or regulation, including:
· Bundled slates of nominees ( e.g. , Canada, France, Hong Kong, or Spain);
· Simultaneous reappointment of retiring directors ( e.g. , South Africa);
· In markets with term lengths capped by regulation or market practice, nominees whose terms exceed the caps or are not disclosed; or
· Nominees whose names are not disclosed in advance of the meeting or far enough in advance relative to voting deadlines to make an informed voting decision.
Generally vote FOR nominees without regard to recommendations that the position of chairman should be separate from that of CEO or otherwise required to be independent, unless other concerns requiring CASE-BY-CASE consideration have been raised. The latter would include former CEOs proposed as board chairmen in markets such as the United Kingdom for which best practice and the Agent recommend against such practice.
When cumulative or net voting applies, generally vote with the Agents recommendation to support nominees asserted by the issuer to be independent, irrespective of audit committee membership, even if independence disclosure or criteria fall short of Agents standards.
Consider nominees for whom the Agent has raised concerns regarding scandals or internal controls on a CASE-BY-CASE basis, generally supporting nominees or slates of nominees unless:
· The scandal or shortfall in controls took place at the company, or an affiliate, for which the nominee is being considered;
· Culpability can be attributed to the nominee ( e.g. , nominee manages or audits the relevant function); and
· The nominee has been directly implicated, with resulting arrest and criminal charge or regulatory sanction.
Consider non-independent nominees on a CASE-BY-CASE basis when the Agent has raised concerns regarding diminished shareholder value as evidenced by a significant drop in share price, generally voting with Agents recommendation AGAINST such nominees when few, if any, outside directors are present on the board and:
· The founding family has retained undue influence over the company despite a history of scandal or problematic controls;
· The nominees have engaged in protectionist activities such as introduction of a poison pill or preferential and/or dilutive share issuances; or
· Evidence exists regarding compliance or accounting shortfalls.
If the Agent recommends withholding support due to other material failures or egregious actions, the Funds U.S. Guidelines with respect to such issues shall apply.
Consider nominees serving on the remuneration committee on a CASE-BY-CASE basis if the Agent recommends withholding support from nominees in connection with remuneration practices not otherwise supported by these Guidelines, including cases in which the issuer has not followed market practice by submitting a resolution on executive compensation. For Canadian issuers, the Funds U.S. Guidelines with respect to Section 1. Voting on Director Nominees in Uncontested Elections, Compensation Practices, shall apply.
For issuers in markets in which it is common practice for nominees attendance records to be disclosed, the Funds U.S. Guidelines with respect to director attendance shall apply. The same two-year attendance policy shall be applied regarding attendance by directors and statutory auditors of Japanese companies if year-over-year data can be tracked by nominee.
Consider self-nominated or shareholder-nominated director candidates on a CASE-BY-CASE basis, with voting decisions generally based on the Agents approach to evaluating such candidates, except that (1) an unqualified candidate will generally not be supported simply to
effect a protest vote, (2) a candidate will generally not be supported if the candidates agenda is not in line with the long-term best interests of the company, and (3) cases of multiple self-nominated candidates may be considered as a proxy contest if similar issues are raised ( e.g. , potential change in control).
Generally vote FOR nominees without regard to over-boarding issues raised by the Agent unless other concerns requiring CASE-BY-CASE consideration have been raised.
In cases where a director holds more than one board seat and corresponding votes, manifested as one seat as a physical person plus an additional seat as a representative of a legal entity, generally vote with the Agents recommendation to withhold support (AGAINST or ABSTAIN, as appropriate) from the legal entity and vote on the physical person.
Generally, vote with the Agents recommendation to withhold support (AGAINST or ABSTAIN, as appropriate) from nominees for whom support has become moot since the time the individual was nominated ( e.g. , due to death, disqualification, or determination not to accept appointment).
Generally, vote with the Agents recommendation when more candidates are presented than available seats and no other provisions under these Guidelines apply.
Board Structure
Generally, vote FOR proposals to fix board size, but vote AGAINST if the Agent opposes due to corporate governance, anti-takeover, or board independence concerns. Generally, vote FOR proposals seeking a board range if the range is reasonable in the context of market practice and anti-takeover considerations. Proposed article amendments in this regard shall be considered on a CASE-BY-CASE basis, with voting decisions generally based on the Agents approach to evaluating such proposals. Consider other proposals regarding board structure or policies on a CASE-BY-CASE basis, voting AGAINST if they promote practices not supported under these Guidelines.
For Japanese issuers, generally, follow the Agents approach to proposals seeking a board structure that would provide greater independence oversight of management and the board.
Director and Officer Indemnification and Liability Protection
Generally, vote in accordance with the Agents standards for indemnification and liability protection for officers and directors, voting AGAINST overly broad provisions.
Independent Statutory Auditors
With respect to Japanese companies that have not adopted the three-committee structure, vote AGAINST any nominee to the position of independent statutory auditor whom the Agent considers affiliated, e.g. , if the nominee has worked a significant portion of his career for the company, its main bank, or one of its top shareholders. Where shareholders must vote on multiple nominees in a single resolution, vote AGAINST all nominees. When multiple slates of statutory auditors are presented, generally vote with the Agents recommendation, typically to support nominees deemed to be more independent and/or aligned with interests of minority shareholders.
Generally, vote AGAINST incumbent nominees at companies implicated in scandals or exhibiting poor internal controls.
Key Committees
Generally, except where market practice otherwise dictates, vote AGAINST proposals that permit non-board members to serve on the audit, remuneration (compensation), or nominating committee, provided that bundled slates, if otherwise acceptable under these Guidelines, may be supported if no slate nominee serves on the relevant committee(s). If not otherwise addressed under these Guidelines, consider other negative recommendations from the Agent regarding committee members on a CASE-BY-CASE basis.
Director and Statutory Auditor Remuneration
Consider director compensation plans on a CASE-BY-CASE basis, with voting decisions generally based on the Agents approach to evaluating such proposals, while also factoring in the merits of the rationale and disclosure provided.
Generally, vote FOR proposals to approve the remuneration of directors and auditors as long as the amount is not excessive ( e.g. , significant increases should be supported by adequate rationale and disclosure), there is no evidence of abuse, the recipients overall compensation appears reasonable, and the board and/or responsible committee meet exchange or market standards for independence.
For European issuers, vote AGAINST non-executive director remuneration if:
· The advance general meeting documents do not specify fees paid to non-executive directors;
· The company seeks to excessively increase the fees relative to market or sector practices without providing a reasonable rationale for the increase; or
· It provides for granting of stock options or similarly structured equity-based compensation.
For Toronto Stock Exchange (TSX) issuers, the Agents limits with respect to equity awards to non-employee directors shall apply.
Bonus Payments
With respect to Japanese companies, generally follow the Agents guidelines on retirement and annual bonus payments, which include voting FOR retirement bonus proposals if all payments are for directors or auditors who have served as executives of the company and AGAINST such proposals if any payments are for outsiders, except when deemed appropriate by the Agent, provided that no payments shall be supported unless the individual or aggregate amounts are disclosed. In all markets, if issues have been raised regarding a scandal or internal controls, generally vote AGAINST bonus proposals for retiring directors or continuing directors or auditors when culpability can be attributed to the nominee ( e.g. , if a Fund is also voting AGAINST the nominee under criteria herein regarding issues of scandal or internal controls), unless bundled with bonuses for a majority of directors or auditors a Fund is voting FOR.
Stock Option Plans for Independent Internal Statutory Auditors
With respect to Japanese companies, follow the Agents guidelines with respect to proposals regarding option grants to independent internal statutory auditors or other outside parties, generally voting AGAINST such plans.
Amendment Procedures for Equity Compensation Plans and Employee Share Purchase Plans ( ESPPs)
For TSX issuers, votes with respect to amendment procedures for security-based compensation arrangements and ESPPs shall generally be cast in a manner designed to preserve shareholder approval rights, with voting decisions generally based on the Agents recommendation.
Compensation Plans and Shares Reserved for Equity Compensation Plans
Unless otherwise provided for herein, votes with respect to equity compensation plans ( e.g. , option, warrant, restricted stock, or employee share purchase plans or participation in company offerings such as IPOs or private placements) or awards thereunder, the issuance of shares in connection with such plans, cash-based plans where appropriate, or related management proposals ( e.g. , article amendments), should be determined on a CASE-BY-CASE basis, with voting decisions generally based on the Agents approach to evaluating such proposals, considering quantitative or qualitative factors as appropriate for the market and utilizing the Agents methodology, including classification of a companys stage of development as growth or mature and the corresponding determination as to reasonability of the share requests.
Generally, vote AGAINST proposals that:
· Exceed Agents recommended burn rates or dilution limits, including cases in which the Agent suggests dilution cannot be fully assessed ( e.g. , due to inadequate disclosure);
· Provide deep or near-term discounts (or the equivalent, such as dividend equivalents on unexercised options) to executives or directors, unless discounts to executives are deemed by the Agent to be adequately mitigated by other requirements such as long-term vesting or performance requirements ( e.g. , Japan) or broad-based employee participation otherwise meeting the Agents standards ( e.g. , France);
· Are administered with discretion by potential grant recipients, unless such discretion is deemed acceptable due to market practice or other mitigating provisions;
· Provide for retirement benefits or equity incentive awards to outside directors if not in line with market practice ( e.g. , Australia, Belgium, or The Netherlands);
· Permit financial assistance to executives, directors, subsidiaries, affiliates, or related parties under conditions not supported by the Agent ( e.g. , misaligned with shareholders interests and/or posing excessive risk or independence concerns);
· For matching share plans, do not meet the Agents standards, considering holding period, discounts, dilution, participation, purchase price, and performance criteria;
· Provide for vesting upon change in control if deemed to evidence a potential conflict of interest or anti-takeover device or if the change in control definition is too liberal ( e.g., does not result in actual change in control);
· Provide inadequate disclosure regarding vesting or performance requirements.
· Include vesting or performance periods that do not meet market standards (or the Agents standards where market standards are unclear);
· Permit post-employment vesting or exercise if deemed inappropriate by the Agent;
· Allow plan administrators to make material amendments without shareholder approval unless adequate prior disclosure has been provided, with such voting decisions generally based on the Agents approach to evaluating such plans;
· Provide for contract or notice periods or severance/termination payments that exceed market practice, e.g. , relative to multiples of annual compensation;
· Promote a pay practice (or combination of practices) not otherwise supported under these Guidelines that appears to d iminish accountability to shareholders and/or has created a misalignment between CEO pay and performance with regard to shareholder value; or
· Provide for retesting in connection with achievement of performance hurdles unless the Agents analysis indicates that (1) performance targets are adequately increased in proportion to the additional time available, (2) the retesting is de minimis as a percentage of overall compensation or is acceptable relative to market practice, or (3) the issuer has committed to cease retesting within a reasonable period of time.
Generally, vote FOR such plans/awards or the related issuance of shares that (1) do not suffer from the defects noted above or (2) otherwise meet the Agents tests if the considerations raised by the Agent pertain primarily to vesting provisions, performance hurdles, discretionary bonuses, recruitment awards, retention incentives, non-compete payments, severance/termination payments, or incentive structures if:
(1) The company has provided adequate disclosure and/or a reasonable rationale regarding the relevant plan/award, practice, or participation;
(2) The recipients overall compensation appears reasonable;
(3) Potential payments or awards are not so significant (individually or collectively) as to potentially influence an executives decision-making ( e.g. , to enter into a transaction that will result in a change of control payment) or to effectively act as a poison pill; and
(4) The board and/or responsible committee meet exchange or market standards for independence.
Unless otherwise provided for herein, market practice of the primary country in which a company does business or competes for talent, or in which an employee is serving, as applicable, shall supersede that of the issuers domicile.
Consider proposals in connection with such plans or the related issuance of shares in other instances on a CASE-BY-CASE basis.
Remuneration Reports (Advisory Votes on Executive Compensation)
Generally, withhold support (AGAINST or ABSTAIN as appropriate for specific market and level of concerns identified) from remuneration reports/advisory votes on compensation that include compensation plans that:
(1) Permit practices or features not supported under these Guidelines, including conditions described under Compensation Plans and Shares Reserved for Equity Compensation Plans above;
(2) Permit retesting excessive relative to market practice (irrespective of the Agents support for the report as a whole);
(3) Cite long-term incentive plans deemed to be inadequately aligned with shareholders because the performance period is too short or they lack an appropriate equity component ( e.g. , overly cash-based plans), except that the latter will be considered CASE-BY-CASE in connection with executives already holding significant equity positions;
(4) Cite equity award valuation methods triggering a negative recommendation from the Agent;
(5) Include components, metrics, or rationales that have not been disclosed in line with market practice (although retrospective disclosure may be considered adequate);
(6) For issuers in Australia, permit open market purchase of shares in support of equity grants in lieu of seeking shareholder approval, but only if the issuer has a history of significant negative votes when formally seeking approval for such grants; or
(7) Include provisions for retirement benefits or equity incentive awards to outside directors if not in line with market practice, except that reports will generally be voted FOR if contractual components are reasonably aligned with market practices on a going-forward basis ( e.g. , existing obligations related to retirement benefits or terms contrary to evolving standards would not preclude support for the report).
Reports receiving the Agents support and not triggering the concerns cited above will generally be voted FOR. Unless otherwise provided for herein, reports not receiving the Agents support due to concerns regarding vesting provisions, performance hurdles, discretionary bonuses, recruitment awards, retention incentives, non-compete payments, severance/termination payments, or incentive structures not otherwise supported by these Guidelines shall be considered on a CASE-BY-CASE basis, generally voted FOR if:
(1) The company has provided a reasonable rationale and/or adequate disclosure regarding the matter(s) under consideration;
(2) The recipients overall compensation appears reasonable;
(3) Potential payments or awards are not so significant (individually or collectively) as to potentially influence an executives decision-making ( e.g. , to enter into a transaction that will result in a change of control payment) or to effectively act as a poison pill; and
(4) The board and/or responsible committee meet exchange or market standards for independence.
Reports with typically unsupported features may be voted FOR when the Agent recommends their initial support as the issuer or market transitions to better practices ( e.g. , having committed to new regulations or governance codes).
Proposals to Provide an Advisory Vote on Executive Compensation
For issuers in Canada, generally support proposals seeking a say on pay, with a preference for an annual vote.
Shareholder Proposals Regarding Executive and Director Pay
Except as otherwise provided for herein, the Funds U.S. Guidelines with respect to shareholder proposals regarding executive and director pay shall generally apply.
General Share Issuances
Unless otherwise provided for herein, voting decisions shall generally be based on the Agents practice to determine support for general issuance requests (with or without preemptive rights), or related requests to repurchase and reissue shares, based on their amount relative to currently issued capital, appropriate volume and duration parameters, and market-specific considerations ( e.g. , priority right protections in France, reasonable levels of dilution and discount in Hong
Kong). Requests to reissue repurchased shares will not be supported unless a related general issuance request is also supported.
Consider specific issuance requests on a CASE-BY-CASE basis based on the proposed use and the companys rationale.
Generally, vote AGAINST proposals to issue shares (with or without preemptive rights), convertible bonds, or warrants, to grant rights to acquire shares, or to amend the corporate charter relative to such issuances or grants when concerns have been identified by the Agent with respect to inadequate disclosure, inadequate restrictions on discounts, failure to meet the Agents standards for general issuance requests, or authority to refresh share issuance amounts without prior shareholder approval.
Generally, vote AGAINST nonspecific proposals authorizing excessive discretion to a board.
Increases in Authorized Capital
Unless otherwise provided for herein, voting decisions should generally be based on the Agents approach, as follows. Generally:
· Vote FOR nonspecific proposals, including bundled proposals, to increase authorized capital up to 100 percent over the current authorization unless the increase would leave the company with less than 30 percent of its new authorization outstanding.
· Vote FOR specific proposals to increase authorized capital, unless:
· The specific purpose of the increase (such as a share-based acquisition or merger) does not meet these Guidelines for the purpose being proposed; or
· The increase would leave the company with less than 30 percent of its new authorization outstanding after adjusting for all proposed issuances.
· Vote AGAINST proposals to adopt unlimited capital authorizations.
· The Agents market-specific exceptions to the above parameters shall be applied.
Preferred Stock
Unless otherwise provided for herein, voting decisions should generally be based on the Agents approach, including:
· Vote FOR the creation of a new class of preferred stock or issuances of preferred stock up to 50 percent of issued capital unless the terms of the preferred stock would adversely affect the rights of existing shareholders.
· Vote FOR the creation/issuance of convertible preferred stock as long as the maximum number of common shares that could be issued upon conversion meets the Agents guidelines on equity issuance requests.
· Vote AGAINST the creation of (1) a new class of preference shares that would carry superior voting rights to the common shares or (2) blank check preferred stock, unless the board states that the authorization will not be used to thwart a takeover bid.
Poison Pills/Protective Preference Shares
Generally, vote AGAINST management proposals in connection with poison pills or anti-takeover activities ( e.g. , disclosure requirements or issuances, transfers, or repurchases) that do not meet the Agents standards. Generally vote in accordance with Agents recommendation to withhold support from a nominee in connection with poison pill or anti-takeover considerations
when responsibility for the actions can be reasonably attributed to the nominee. Generally DO NOT VOTE AGAINST director remuneration in connection with poison pill considerations raised by the Agent.
Waiver on Tender-Bid Requirement
Generally, consider proposals on a CASE-BY-CASE basis seeking a waiver for a major shareholder or concert party from the requirement to make a buyout offer to minority shareholders, voting FOR when little concern of a creeping takeover exists and the company has provided a reasonable rationale for the request, and with voting decisions generally based on the Agents approach to evaluating such requests.
Approval of Financial Statements and Director and Auditor Reports
Generally, vote FOR management proposals seeking approval of financial accounts and reports, unless there is concern about the companys financial accounts and reporting, which, in the case of related party transactions, would include concerns raised by the Agent regarding inadequate disclosure, remuneration arrangements (including severance/termination payments exceeding local standards for multiples of annual compensation), or consulting agreements with non-executive directors. Unless otherwise provided for herein, reports not receiving the Agents support due to other concerns regarding severance/termination payments not otherwise supported by these Guidelines shall be considered on a CASE-BY-CASE basis, factoring in the merits of the rationale or disclosure provided and generally voted FOR if the overall remuneration package and/or program at issue appears reasonable and the board and/or responsible committee meet exchange or market standards for independence. Generally, vote AGAINST board-issued reports receiving a negative recommendation from the Agent due to concerns regarding independence of the board or the presence of non-independent directors on the audit committee. However, generally do not withhold support from such proposals in connection with remuneration practices otherwise supported under these Guidelines or as a means of expressing disapproval of broader practices of the issuer or its board.
Remuneration of Auditors
Generally, vote FOR proposals to authorize the board to determine the remuneration of auditors, unless there is evidence of excessive compensation relative to the size and nature of the company.
Indemnification of Auditors
Generally, vote AGAINST proposals to indemnify auditors.
Ratification of Auditors and Approval of Auditors Fees
For Canadian issuers, the Funds U.S. Guidelines with respect to auditors and auditor fees shall apply.
For other markets, generally, follow the Agents standards for proposals seeking auditor ratification or approval of auditors fees, which generally indicate a vote FOR such proposals if the level of disclosure and independence meet the Agents standards. However, if fees for non-audit services (excluding significant, one-time events) exceed 50 percent of total auditor fees, consider on a CASE-BY-CASE basis, and vote AGAINST ratification of auditors or approval of auditors fees opposed by the Agent if it appears that remuneration for the non-audit work is so lucrative as to taint the auditors independence, including circumstances where no rationale is provided.
In other cases, generally vote FOR such proposals unless there are material concerns raised by the Agent about the auditors practices or independence.
Audit Commission
Consider nominees to the audit commission on a CASE-BY-CASE basis, with voting decisions generally based on the Agents approach to evaluating such candidates.
Allocation of Income and Dividends
With respect to Japanese companies, consider management proposals concerning allocation of income and the distribution of dividends, including adjustments to reserves to make capital available for such purposes, on a CASE-BY-CASE basis, generally voting with the Agents recommendations to support such proposals unless:
· The dividend payout ratio has been consistently below 30 percent without adequate explanation; or
· The payout is excessive given the companys financial position.
Generally vote FOR such proposals by issuers in other markets.
In any markets, in the event management offers multiple dividend proposals on the same agenda, consider on a CASE-BY-CASE basis, with primary consideration given to input from the relevant Investment Professional(s) and voting decisions generally based on the Agents recommendation if no input is received.
Stock (Scrip) Dividend Alternatives
Generally, vote FOR most stock (scrip) dividend proposals, but vote AGAINST proposals that do not allow for a cash option unless management demonstrates that the cash option is harmful to shareholder value.
Debt Instruments and Issuance Requests
Generally, vote AGAINST proposals authorizing excessive discretion to a board to issue or set terms for debt instruments ( e.g. , commercial paper). Generally, vote FOR debt issuances for companies when the gearing level (current debt-to-equity ratio ) is between zero and 100 percent. Review on a CASE-BY-CASE basis proposals where the issuance of debt will result in the gearing level being greater than 100 percent, or for which inadequate disclosure precludes calculation of the gearing level, comparing any such proposed debt issuance to industry and market standards, and with voting decisions generally based on the Agents approach to evaluating such requests.
Financing Plans
Generally, vote FOR the adoption of financing plans if they are in the best economic interests of shareholders.
Related Party Transactions
Consider related party transactions on a CASE-BY-CASE basis. Generally, vote FOR approval of such transactions unless the agreement requests a strategic move outside the companys charter, contains unfavorable or high-risk terms ( e.g. , deposits without security interest or guaranty), or is deemed likely to have a negative impact on director independence.
Approval of Donations
Generally, vote AGAINST such proposals unless adequate, prior disclosure of amounts is provided; if so, single- or multi-year authorities may be supported.
Capitalization of Reserves
Generally, vote FOR proposals to capitalize the companys reserves for bonus issues of shares or to increase the par value of shares, unless concerns not otherwise supported under these Guidelines are raised by the Agent.
Investment of Company Reserves
These proposals should generally be analyzed on a CASE-BY-CASE basis, with primary consideration given to input from the relevant Investment Professional(s).
Article and Bylaw Amendments
Review on a CASE-BY-CASE basis all proposals seeking adoption of, or amendments to, the articles of association, bylaws, or related board policies.
Generally, vote FOR the proposal if:
· The change or policy is editorial in nature;
· Shareholder rights are protected;
· There is negligible or positive impact on shareholder value;
· Management provides adequate reasons for the amendments or the Agent otherwise supports managements position;
· It seeks to discontinue and/or delist a form of the issuers securities when the relevant Fund does not hold the affected security type;
· Notice or disclosure requirements are reasonable; or
· The company is required to do so by law (if applicable).
Generally, vote AGAINST the proposal if:
· It removes or lowers quorum requirements for board or shareholder meetings below levels recommended by the Agent;
· It reduces relevant disclosure to shareholders;
· It seeks to align the articles with provisions of another proposal not supported by these Guidelines;
· It is not supported under these Guidelines, is presented within a bundled proposal, and the negative impact, on balance, outweighs any positive impact; or
· It imposes a negative impact on existing shareholder rights, including rights of the Funds, or diminishes accountability to shareholders to the extent that any positive impact would not be deemed to be sufficient to outweigh removal or diminution of such rights.
With respect to article amendments for Japanese companies:
· Generally vote FOR management proposals to amend a companys articles to expand its business lines.
· Generally vote FOR management proposals to amend a companys articles to provide for an expansion or reduction in the size of the board, unless the expansion/reduction is clearly disproportionate to the growth/decrease in the scale of the business or raises anti-takeover concerns.
· If anti-takeover concerns exist, generally vote AGAINST management proposals,
including bundled proposals, to amend a companys articles to authorize the Board to vary the annual meeting record date or to otherwise align them with provisions of a takeover defense.
· Generally follow the Agents guidelines with respect to management proposals regarding amendments to authorize share repurchases at the boards discretion, voting AGAINST proposals unless there is little to no likelihood of a creeping takeover or constraints on liquidity (free float of shares is low), and where the company is trading at below book value or is facing a real likelihood of substantial share sales; or where this amendment is bundled with other amendments which are clearly in shareholders interest.
Other Business
In connection with global proxies, vote in accordance with the Agents market-specific recommendations on management proposals for Other Business, generally AGAINST.
PART C
OTHER INFORMATION
Voya Prime Rate Trust
(5,000,000 Common Shares)
Item 25. Financial Statements and Exhibits
1. |
Financial Statements |
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Contained in Part A: |
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Financial Highlights for the years ended February 28, 2014, February 28, 2013, February 29, 2012, February 28, 2011, 2010 and 2009, February 29, 2008, February 28, 2007, 2006 and 2005. |
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Financial Statements are incorporated in Part B by reference to Registrants February 28, 2014 annual shareholder report (audited). |
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2. |
Exhibits |
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(a) |
1. |
Agreement and Declaration of Trust dated December 2, 1987. (1) |
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(i) |
Amendment to the Agreement and Declaration of Trust dated March 26, 1996 and effective April 12, 1996. (1) |
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(ii) |
Amendment to the Agreement and Declaration of Trust dated October 23, 1998 and effective November 16, 1998. (7) |
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(iii) |
Amendment to the Agreement and Declaration of Trust dated October 20, 2000 and effective October 20, 2000. (9) |
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(iv) |
Amendment to the Agreement and Declaration of Trust dated February 20, 2002 and effective March 1, 2002. (10) |
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(v) |
Amendment to the Agreement and Declaration of Trust dated June 11, 2010.(20) |
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(vi) |
Amendment to the Agreement and Declaration of Trust dated January 23, 2014 Filed herein. |
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(b) |
1. |
By-Laws adopted at a meeting of the Board of Trustees on December 2, 1987. (15) |
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(i) |
Amendment dated June 18, 1997 to By-Laws, amends paragraph 3.5 and 3.6 of Article 3. (2) |
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(ii) |
Amendment adopted on August 2, 1999 to By-Laws, amends Section 11.5 of Article 11. (8) |
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(iii) |
Amendment adopted on July 26, 2000 to By-Laws, amends Section 11.1 and 11.3 of Article 11. (9) |
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(iv) |
Amendment adopted on November 10, 2005 to By-Laws, amends Section 11.5 of Article 11. (15) |
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(c) |
Not Applicable |
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(d) |
1. |
Certificate of Designation for Preferred Shares dated October 20, 2000.(20) |
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2. |
Form of Share Certificate. (9) |
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3. |
Certificate Evidencing the Termination of the Certificate of Designation for Preferred Shares dated June 28, 2012. (23) |
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(e) |
Shareholder Reinvestment Program. (12) |
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(f) |
Not Applicable |
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(g) |
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1. |
Investment Management Agreement between Voya Investments, LLC (formerly, ING Investments, LLC) and Voya Prime Rate Trust dated May 7, 2013 Filed herein. |
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2. |
Sub-Advisory Agreement between Voya Investments, LLC and Voya Investment Management Co. LLC (formerly, ING Investment Management Co. LLC) dated May 7, 2013 Filed herein. |
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(h) |
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1. |
Distribution Agreement between Voya Prime Rate Trust and Voya Investments Distributor, LLC (formerly, ING Investments Distributor, LLC) (5 Million Shares) dated May 7, 2013 Filed herein. |
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2. |
Underwriting Agreement for the Preferred Shares dated November 13, 2000. (12) |
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(i) |
Underwriting Agreement for the Preferred Shares dated October 30, 2000. (12) |
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3. |
Voya Prime Rate Trust Shareholder Reinvestment Program dated April 2006. (15) |
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(i) |
Not Applicable |
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(j) |
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1. |
Custodian and Investment Accounting Agreement between Registrant and State Street Bank and Trust Company effective November 1, 2001. (12) |
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(i) |
First Amendment dated March 1, 2002 to the Custodian and Investment Accounting Agreement. (12) |
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(ii) |
Amended and Restated Exhibit A effective November 22, 2002 with respect to the Custodian and Investment Accounting Agreement. (12) |
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(iii) |
Second Amendment dated October 1, 2007 to the Custodian and Investment Accounting Agreement.(16) |
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(iv) |
Third Amendment dated August 2, 2010 to the Custodian and Investment Accounting Agreement.(20) |
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2. |
Fee Allocation Agreement (FT Interactive) dated August 21, 2003. (12) |
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(i) |
Amended Schedule A dated May 2013 to the FT Fee Allocation Agreement. (23) |
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3. |
Amended and Restated Proxy Agent Fee Allocation Agreement dated January 1, 2008 amends and restates the Proxy Agent Allocation Agreement dated August 21, 2003. (22) |
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(i) |
Amended Schedule A dated May 2013 to the Amended and Restated ISS Proxy Agent Fee Allocation Agreement. (23) |
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(ii) |
Schedule B dated June 30, 2003 to Amended and Restated ISS Proxy Agent Fee Allocation Agreement. (15) |
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4. |
Allocation Agreement Fidelity Bond made May 24, 2002. (12) |
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(i) |
Amended Schedule A dated May 2007 with respect to the Allocation Agreement (Blanket Bond). (15) |
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5. |
Allocation Agreement Directors & Officers Liability made May 24, 2002. (12) |
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(i) |
Amended Schedule A dated September 12, 2013 with respect to the Allocation Agreement Directors & Officers Liability Filed herein. |
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6. |
Transfer Agency Services Agreement dated February 25, 2009 between BNY Mellon Investment Servicing (US) Inc. (formerly, PNC Global Investment Servicing (U.S.) Inc.), and Voya Prime Rate Trust.(17) |
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(i) |
Amended Schedule A dated March 28, 2013 to the Transfer Agency Services Agreement between BNY Mellon Investment Servicing (US) Inc. and Voya Prime Rate Trust. (23) |
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(ii) |
Amendment dated February 8, 2011 to Transfer Agency Services Agreement between BNY Mellon Investment Servicing (US) Inc. and Voya Prime Rate Trust.(21) |
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(k) |
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1. |
Amended and Restated Administration Agreement dated October 20, 1992, amended and restated as of February 17, 1995, April 7, 1995, May 2, 1996, April 7, 1997, February 2, 1999, November 30, 2008, and as further amended and restated on March 7, 2013 Filed herein. |
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2. |
Revolving Credit and Security Agreement between Voya Prime Rate Trust and Citibank dated July 16, 2003. (12) |
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(i) |
Amendment No. 1 to the Revolving Credit and Security Agreement dated February 3, 2004. (12) |
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(ii) |
Amendment No. 2 to the Revolving Credit and Security Agreement dated July 13, 2004. (13) |
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(iii) |
Amendment No. 3 to the Revolving Credit and Security Agreement dated October 15, 2004. (13) |
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3. |
Second Amended and Restated Credit Agreement with Bank of America. (12) |
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4. |
Auction Agency Agreement dated November 16, 2000. (12) |
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(i) |
Auction Agency Agreement dated November 2, 2000. (12) |
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5. |
Broker-Dealer Agreement (UBS) dated November 16, 2000. (12) |
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(i) |
Broker-Dealer Agreement (Salomon Smith Barney) dated November 16, 2000.(12) |
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(ii) |
Broker-Dealer Agreement (Lehman Brothers) dated November 16, 2000.(12) |
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(iii) |
Broker-Dealer Agreement (Gruntal & Co.) dated November 16, 2000.(12) |
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(iv) |
Broker-Dealer Agreement (PaineWebber) dated November 2, 2000.(12) |
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(v) |
Broker-Dealer Agreement (Gruntal & Co.) dated November 2, 2000.(12) |
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(vi) |
Broker-Dealer Agreement (Salomon Smith Barney) dated November 2, 2000.(12) |
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(vii) |
Broker-Dealer Agreement (Lehman Brothers) dated October 31, 2000.(12) |
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6. |
DTC Letter of Representations as to Preferred Shares dated November 15, 2000.(12) |
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(i) |
DTC Letter of Representation as to Preferred Shares dated November 1, 2000.(12) |
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7. |
Expense Limitation Agreement effective May 7, 2013 between Voya Investments, LLC and Voya Prime Rate Trust Filed herein. |
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(l) |
1. |
Opinion of Dechert LLP. (22) |
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(m) |
Not Applicable |
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(n) |
1. |
Consent of Dechert LLP Filed herein. |
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2. |
Consent of KPMG LLP Filed herein. |
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(o) |
Not Applicable |
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(p) |
Certificate of Initial Capital.(4) |
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(q) |
Not Applicable |
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(r) |
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1. |
Voya Funds and Advisers Code of Ethics Amended May 2014 Filed herein. |
(1) Incorporated herein by reference to Amendment No. 20 to Registrants Registration Statement under the Investment Company Act of 1940 (the 1940 Act) on Form N-2 (File No. 811-5410), filed on September 16, 1996.
(2) Incorporated herein by reference to Amendment No. 24 to Registrants Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on November 7, 1997.
(3) Incorporated herein by reference to Amendment No. 22 to Registrants Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on June 23, 1997.
(4) Incorporated herein by reference to Pre-Effective Amendment No. 1 to Registrants initial registration statement on form N-2 (File No. 33-18886), filed on January 22, 1988.
(5) Incorporated herein by reference to Amendment No. 27 to Registrants Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on May 15, 1998.
(6) Incorporated herein by reference to Amendment No. 28 to Registrants Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on August 19, 1998.
(7) Incorporated herein by reference to Amendment No. 29 to Registrants Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on December 2, 1998.
(8) Incorporated herein by reference to Amendment No. 33 to Registrants Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on May 9, 2000.
(9) Incorporated herein by reference to Amendment No. 38 to Registrants Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on October 23, 2000.
(10) Incorporated herein by reference to Amendment No. 45 to Registrants Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on April 30, 2002.
(11) Incorporated herein by reference to Amendment No. 53 to Registrants Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on June 26, 2003.
(12) Incorporated herein by reference to Amendment No. 58 to Registrants Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on June 28, 2004.
(13) Incorporated herein by reference to Amendment No. 61 to Registrants Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on June 30, 2005.
(14) Incorporated herein by reference to Amendment No. 66 to Registrants registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on June 30, 2006.
(15) Incorporated herein by reference to Amendment No. 70 to Registrants Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on June 29, 2007.
(16) Incorporated herein by reference to Amendment No. 74 to Registrants Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on June 27, 2008.
(17) Incorporated herein by reference to Amendment No. 80 to Registrants Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on August 13, 2009.
(18) Incorporated herein by reference to Amendment No. 82 to Registrants Registration Statement under the 1940 Act on Form N-2 (file No. 811-5410), filed on April 22, 2009.
(19) Incorporated herein by reference to Amendment No. 84 to Registrants Registration Statement under the 1940 Act on Form N-2 (file No. 811-5410), filed on June 28, 2010.
(20) Incorporated herein by reference to Amendment No. 86 to the Registrants Registration Statement under the 1940 Act on Form N-2 (file No. 811-5410), filed on April 27, 2011.
(21) Incorporated herein by reference to Amendment No. 88 to the Registrants Registrant Statement under the 1940 Act on Form N-2 (filed No. 811-5410), filed on June 28, 2011.
(22) Incorporated herein by reference to Amendment No. 91 to the Registrants Registrant Statement under the 1940 Act on Form N-2 (filed No. 811-5410), filed on June 27, 2012.
(23) Incorporated herein by reference to Amendment No. 95 to the Registrants Registration Statement under the 1940 Act on Form N-2 (filed No. 811-5410), filed on June 21, 2013.
Item 26. Marketing Agreements
Not Applicable.
Item 27. Other Expenses of Issuance and Distribution
Not Applicable.
Item 28. Persons Controlled by or Under Common Control
Not Applicable.
Item 29. Number of Holders of Securities
(1) Title of Class |
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(2) Number of Record Holders
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Common Shares of beneficial interest, par value $0.01 per share |
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3,995 |
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Item 30. Indemnification
Registrants Agreement and Declaration of Trust generally provides that the Trust shall indemnify each of its Trustees and officers (including persons who serve at the Trusts request as directors, officers, or trustees of another organization in which the Trust has any interest as a shareholder, creditor, or otherwise) (Covered Persons) against all liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees reasonably incurred in connection with the defense or disposition of any action, suit, or other proceeding, whether civil or criminal, by reason of being or having been such a Covered Person except with respect to any matter as to which such Covered Person shall have been finally adjudicated: (a) not to have acted in good faith in the reasonable belief that such Covered Persons action was in the best interest of the Trust; or (b) to be liable to the Trust or its shareholders by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of duties involved in the conduct of such Covered Persons office.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to Trustees, officers, and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of the Registrant of expenses incurred or paid by a Trustee, officer, or controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such Trustee, officer, or controlling person in connection with the securities being registered, the Registrant will submit, unless in the opinion of its counsel the matter has been settled by controlling precedent, to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
Item 31. Business and Other Connections of Investment Adviser
Information as to the Trustees and officers of the Adviser, together with information as to any other business, profession, vocation, or employment of a substantial nature engaged in by the directors and officers of the Adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-48282) filed under the Investment Advisers Act of 1940, as amended (Advisers Act), and is incorporated herein by reference thereto.
Information as to the directors and officers of the sub-adviser, together with information as to any other business, profession, vocation, or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV for Voya Investment Management Co. LLC (File No. 801-9046) filed under the Investment Adviser Act of 1940, as amended, and is incorporated by reference thereto.
Item 32. Location of Accounts and Records
The amounts and records of the Registrant will be maintained at its office at 7337 E. Doubletree Ranch Road, Suite 100, Scottsdale, Arizona 85258, at the office of its sub-adviser, Voya Investment Management Co. LLC, 230 Park Avenue, New York, NY 10169, and at the office of its custodian, State Street Bank & Trust, 801 Pennsylvania, Kansas City, Missouri 64105.
Item 33. Management Services
Not Applicable.
Item 34. Undertakings
1. The Registrant undertakes to suspend the Offer until the prospectus is amended if: (a) subsequent to the effective date of this registration statement, the net asset value declines more than ten percent from its net asset value as of the effective date of this registration statement; or (b) the net asset value increases to an amount greater than the net proceeds as stated in the prospectus included in this registration statement.
2. Not Applicable.
3. Not Applicable.
4. The Registrant undertakes:
a. to file, during any period in which offers or sales are being made, a post-effective amendment to the registration statement: (i) to include any prospectus required by Section 10(a)(3) of the 1933 Act; (ii) to reflect in the prospectus any facts or events after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and (iii) to include any
material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
b. that, for the purpose of determining any liability under the 1933 Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of those securities at that time shall be deemed to be the initial bona fide offering thereof; and
c. to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; and
d. Not Applicable
e. that, for the purpose of determining liability of the Registrant under the 1933 Act to any purchaser in the initial distribution of securities, the undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to the purchaser: (i) any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 497 under the 1933 Act; (ii) the portion of any advertisement pursuant to Rule 482 under the 1933 Act relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and (iii) any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.
5.
a. The Registrant undertakes that for the purpose of determining any liability under the 1933 Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant under Rule 497(h) under the 1933 Act [17 CFR 230.497(h)] shall be deemed to be part of this Registration Statement as of the time it was declared effective; and
b. that for the purpose of determining any liability under the 1933 Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof.
6. The Registrant undertakes to send by first class mail or other means designed to ensure equally prompt delivery, within two business days of receipt of a written or oral request, any Statement of Additional Information.
SIGNATURES
Pursuant to requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Scottsdale and State of Arizona on the 24th day of June, 2014.
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VOYA PRIME RATE TRUST |
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By: |
/s/ Huey P. Falgout, Jr. |
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Huey P. Falgout, Jr. |
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Secretary |
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated:
Signature |
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Title |
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Date |
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Interested Trustee and President and Chief Executive Officer |
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June 24, 2014 |
Shaun P. Mathews* |
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Senior Vice President, Chief/Principal Financial Officer |
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June 24, 2014 |
Todd Modic* |
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Trustee |
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June 24, 2014 |
Colleen D. Baldwin* |
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Trustee |
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June 24, 2014 |
John V. Boyer* |
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Trustee |
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June 24, 2014 |
Patricia W. Chadwick* |
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Trustee |
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June 24, 2014 |
Albert E. DePrince, Jr.* |
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Trustee |
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June 24, 2014 |
Peter S. Drotch* |
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Trustee |
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June 24, 2014 |
J. Michael Earley* |
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Trustee |
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June 24, 2014 |
Russell H. Jones* |
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Trustee |
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June 24, 2014 |
Patrick W. Kenny* |
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Trustee |
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June 24, 2014 |
Joseph E. Obermeyer* |
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Trustee |
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June 24, 2014 |
Sheryl K. Pressler* |
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Trustee |
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June 24, 2014 |
Roger B. Vincent* |
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* By: |
/s/ Huey P. Falgout, Jr. |
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Huey P. Falgout, Jr. |
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Attorney-in-Fact** |
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** Powers of Attorney for Shaun P. Mathews, Todd Modic and each Trustee dated May 22, 2013 were filed as attachments to Amendment No. 95 to the Registrants Registration Statement under the 1940 Act on Form N-2 (filed No. 811-5410), filed on June 21, 2013.
EXHIBIT INDEX
Voya Prime Rate Trust
(5,000,000 Common Shares)
EXHIBIT NUMBER |
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EXHIBIT NAME |
2(a)(vi) |
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Amendment to the Agreement and Declaration of Trust dated January 23, 2014 |
2(g)(1) |
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Investment Management Agreement between Voya Investments, LLC (formerly, ING Investments, LLC) and Voya Prime Rate Trust dated May 7, 2013 |
2(g)(2) |
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Sub-Advisory Agreement between Voya Investments, LLC and Voya Investment Management Co. LLC (formerly, ING Investment Management Co. LLC) dated May 7, 2013 |
2(h)(1) |
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Distribution Agreement between Voya Prime Rate Trust and Voya Investments Distributor, LLC (formerly, ING Investments Distributor, LLC) (5 Million Shares) dated May 7, 2013 |
2(j)(5)(i) |
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Amended Schedule A dated September 12, 2013 with respect to the Allocation Agreement Directors & Officers Liability |
2(k)(1) |
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Amended and Restated Administration Agreement dated October 20, 1992, amended and restated as of February 17, 1995, April 7, 1995, May 2, 1996, April 7, 1997, February 2, 1999, November 30, 2008, and as further amended and restated on March 7, 2013 |
2(k)(7) |
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Expense Limitation Agreement effective May 7, 2013 between Voya Investments, LLC and Voya Prime Rate Trust |
2(n)(1) |
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Consent of Dechert LLP |
2(n)(2) |
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Consent of KPMG LLP |
2(r)(1) |
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Voya Funds and Advisers Code of Ethics Amended May 2014 |
Exhibit 2(a)(vi)
WRITTEN INSTRUMENT AMENDING
THE AGREEMENT AND DECLARATION OF TRUST
OF
ING PRIME RATE TRUST
This Amendment to the Agreement and Declaration of Trust (Declaration) of ING Prime Rate Trust (the Trust), is made this 23 rd day of January, 2014 by the parties signatory hereto, as Trustees of the Trust (the Trustees).
WITNESSETH
WHEREAS, the Declaration of Trust was made on December 2, 1987, and amended on March 26, 1996, October 23, 1998, October 20, 2000, February 20, 2002, and June 11, 2010, and the Trustees now desire to amend the Declaration to change the name of the Trust; and
WHEREAS, Article IX, Section 7 of the Declaration provides that the Trustees may amend the Declaration without the vote or consent of shareholders to change the name of the Trust by an instrument signed by a majority of the Trustees; and
WHEREAS, the Trustees have determined that the following amendment to the Declaration shall not adversely affect the rights of the shareholders of the Trust.
NOW, THEREFORE, the Trustees hereby declare that Article I, Section 1 be amended, effective May 1, 2014 to read as follows:
Section 1. Name . This Trust shall be known as Voya Prime Rate Trust, and the Trustees shall conduct the business of the Trust under that name or any other name as they may from time to time determine.
The Trustees hereby agree that this document may be signed in counterparts but treated as one document.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
ING WITNESS WHEREOF, the undersigned have executed this instrument this 23 rd day of January, 2014.
/s/ Colleen D. Baldwin |
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/s/ Russell H. Jones |
Colleen D. Baldwin, as Trustee |
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Russell H. Jones, as Trustee |
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/s/ John V. Boyer |
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/s/ Patrick W. Kenny |
John V. Boyer, as Trustee |
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Patrick W. Kenny, as Trustee |
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/s/ Patricia W. Chadwick |
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/s/ Shaun P. Mathews |
Patricia W. Chadwick, as Trustee |
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Shaun P. Mathews, as Trustee |
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/s/ Dr. Albert E. DePrince, Jr. |
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/s/ Joseph E. Obermeyer |
Dr. Albert E. DePrince, Jr., as Trustee |
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Joseph E. Obermeyer, as Trustee |
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/s/ Peter S. Drotch |
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/s/ Sheryl K. Pressler |
Peter S. Drotch, as Trustee |
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Sheryl K. Pressler, as Trustee |
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/s/ J. Michael Earley |
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/s/ Roger B. Vincent |
J. Michael Earley, as Trustee |
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Roger B. Vincent, as Trustee |
Exhibit 2(g)(1)
INVESTMENT MANAGEMENT AGREEMENT
ING PRIME RATE TRUST
AGREEMENT dated May 7, 2013, is by and ING Prime Rate Trust (the Fund), a Massachusetts business trust and ING Investments, LLC (the Adviser), a limited liability company organized and existing under the laws of the State of Arizona (the Agreement).
WHEREAS , the Fund is a closed-end management investment company, registered as such under the Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS , the Adviser is registered as an investment adviser under the Investment Advisers Act of 1940, and is engaged in the business of supplying investment advice, investment management and administrative services, as an independent contractor; and
WHEREAS , the Fund desires to retain the Adviser to render advice and services pursuant to the terms and provisions of this Agreement, and the Adviser is willing to furnish said advice and services.
NOW, THEREFORE , in consideration of the covenants and the mutual promises hereinafter set forth, the parties hereto, intending to be legally bound hereby, mutually agree as follows:
1. Employment : The Fund hereby employs the Adviser and the Adviser hereby accepts such employment, to render investment advice and investment management services with respect to the assets of the Trust, subject to the supervision and direction of the Trustees. The Adviser shall, as part of its duties hereunder (i) furnish the Fund with advice and recommendations with respect to the investment of the Trusts assets and the purchase and sale of its portfolio securities, including the taking of such other steps as may be necessary to implement such advice and recommendations, (ii) furnish the Fund with reports, statements and other data on securities, economic conditions and other pertinent subjects which the Trusts Board of Trustees may request, (iii) permit its officers and employees to serve without compensation as Trustees of the Fund if elected to such positions and (iv) in general superintend and manage the investment of the Trust, subject to the ultimate supervision and direction to the Trusts Board of Trustees.
Subject to the approval of the Trustees of the Fund, the Adviser is authorized to enter into sub-advisory agreements with other registered investment advisers to serve as investment sub-advisers, whether or not affiliated with the Adviser (each a Sub-Adviser). The Adviser will continue to have responsibility for all services furnished pursuant to any sub-advisory agreement. The Fund and Adviser understand and agree that the Adviser may manage the Fund with either a single or multiple sub-advisers, which contemplates that the Adviser will, among other things: (i) continually evaluate the performance of any Sub-Adviser to the Fund; and (ii) periodically make recommendations to the Funds Trustees regarding the results of its evaluation and monitoring functions. The Fund recognizes that, subject to the approval of the Trustees of the Fund, a Sub-Advisers services may be terminated or modified and that the Adviser may appoint a new Sub-Adviser for the Fund.
2. The Adviser shall use its best judgment and efforts in rendering the advice and services to the Fund as contemplated by this Agreement.
3. The Adviser shall, for all purposes herein, be deemed to be an independent contractor, and shall, unless otherwise expressly provided and authorized, have no authority to act for or represent the Fund in any way, or in any way be deemed an agent for the Fund. It is expressly understood and agreed that the services to be rendered by the Adviser to the Fund under the provisions of this Agreement are not to be deemed exclusive, and the Adviser shall be free to render similar or different services to others so long as its ability to render the services provided for in this Agreement shall not be impaired thereby.
4. The Adviser agrees to use its best efforts in the furnishing of such advice and recommendations to the Fund, in the preparation of reports and information, and in the management of the Funds assets, all pursuant to this Agreement, and for this purpose the Adviser shall, at its own expense, maintain such staff and employ or retain such personnel and consult with such other persons as it shall from time to time determine to be necessary to the performance of its obligations under this Agreement. Without limiting the generality of the foregoing, the staff and personnel of the Adviser shall be deemed to include persons employed or retained by the Adviser to furnish statistical, research, and other factual information, advice regarding economic factors and trends, information with respect to technical and scientific developments, and such other information, advice and assistance as the Adviser may desire and request.
5. The Fund will from time to time furnish to the Adviser detailed statements of the investments and assets of the Fund and information as to its investment objectives and needs, and will make available to the Adviser such financial reports, proxy statements, legal and other information relating to its investments as may be in the possession of the Fund or available to it and such other information as the Adviser may reasonably request.
6. Whenever the Adviser has determined that the Fund should tender securities pursuant to a tender offer solicitation, the Adviser shall designate an affiliate as the tendering dealer so long as it is legally permitted to act in such capacity under the federal securities laws and rules thereunder and the rules of any securities exchange or association of which such affiliate may be a member. Such affiliated dealer shall not be obligated to make any additional commitments of capital, expense or personnel beyond that already committed (other than normal periodic fees or payments necessary to maintain its corporate existence and membership in the National Association of Securities Dealers, Inc.) as of the date of this Agreement. This Agreement shall not obligate the Adviser or such affiliate (i) to act pursuant to the foregoing requirement under any circumstances in which they might reasonably believe that liability might be imposed upon them as a result of so acting, or (ii) to institute legal or other proceedings to collect fees which may be considered to be due from others to it as a result of such a tender, unless the Fund shall enter into an agreement with such affiliate to reimburse it for all expenses connected with attempting to collect such fees, including legal fees and expenses and that portion of the compensation due to their employees which is attributable to the time involved in attempting to collect such fees.
7. The Adviser shall bear and pay the costs of rendering the services to be performed by it under this Agreement. The Fund shall bear and pay for all other expenses of its operation, including, but not limited to, expenses incurred in connection with the issuance, registration and transfer of its shares; fees of its custodian, transfer and shareholder servicing agent; costs and expenses of pricing and calculating its daily net asset value and of maintaining its books of account required by the 1940 Act; expenditures in connection with meetings of the shareholders and directors, except those called solely to accommodate the Adviser; salaries of officers and fees and expenses of directors or members of any advisory board or committee who are not members of, affiliated with or interested persons of the Adviser; salaries of personnel involved in placing orders for the execution of the Funds portfolio transactions or in maintaining registration of its shares under state securities laws; insurance premiums on property or personnel of the Fund which inure to its benefit; the cost of preparing and printing reports, proxy statements and registration statement of the Fund, as may be amended or supplemented from time to time (the Registration Statement) as filed with the SEC or other communications for distribution to its shareholders; legal, auditing and accounting fees; Board-approved trade association dues; fees and expenses of registering and maintaining registration of its shares for sale under federal and applicable state securities laws; and all other charges and costs of its operation plus any extraordinary and non-recurring expenses, except as herein otherwise prescribed. To the extent the Adviser incurs any costs or performs any services which are an obligation of the Fund, as set forth herein, the Fund shall promptly reimburse the Adviser for such costs and expenses. To the extent the services for which the Fund is obligated to pay are performed by the Adviser, the Adviser shall be entitled to recover from the Fund only to the extent of its costs for such services.
8. The Adviser may delegate the performance of certain investment advisory services, as described hereunder, to a Sub-Adviser.
9. In the event that the Adviser wishes to select others to render investment management services, the Adviser shall analyze, select and recommend for consideration and approval by the Funds Board of Trustees investment advisory firms (however organized) to provide investment advice to the Fund, and, at the expense of the Adviser, engage (which engagement may also be by the Fund) any such investment advisory firm to render investment advice and manage the investments of the Fund and the composition the Funds portfolio of securities and investments, including cash, and the purchase, retention and disposition thereof, or any offering thereof, in accordance with the Funds investment objective or objectives and policies as stated in the Funds Registration Statement. The Adviser shall take the following actions in respect of the performance by the Sub-Adviser of its obligations in respect of the Fund:
(a) periodically monitor and evaluate the performance of the Sub-Advisers with respect to the investment objectives and policies of the Fund, including without limitation, perform periodic detailed analysis and review of the Sub-Advisers investment performance in respect of the Fund and in respect of other accounts managed by the Sub-Adviser with similar investment strategies;
(b) prepare and present periodic reports to the Board of Trustees regarding the investment performance of the Sub-Adviser and other information regarding the Sub-Adviser, at such times and in such forms as the Board of Trustees may reasonably request;
(c) review and consider any changes in the personnel of the Sub-Adviser responsible for performing the Sub-Advisers obligations and make appropriate reports to the Board of Trustees;
(d) review and consider any changes in the ownership or senior management of the Sub-Adviser and make appropriate reports to the Board of Trustees;
(e) perform periodic in-person or telephonic diligence meetings with representatives of the Sub-Adviser;
(f) supervise Sub-Advisers with respect to the services that such Sub-Advisers provide under each Sub-Advisers Sub-Advisory Agreement;
(g) assist the Board of Trustees and management of the Fund in developing and reviewing information with respect to the initial approval of the Sub-Adviser Agreement with the Sub-Adviser and annual consideration of the agreement thereafter;
(h) monitor the Sub-Advisers for compliance with the investment objective or objectives, policies and restrictions of the Fund, the 1940 Act, Subchapter M of the Internal Revenue Code, and if applicable, regulations under such provisions, and other applicable law;
(i) if appropriate, analyze and recommend for consideration by the Funds Board of Trustees termination of a contract with a Sub-Adviser under which the Sub-Adviser provides investment advisory services to Fund;
(j) identify potential successors to or replacements of the Sub-Adviser or potential additional Sub-Advisers, perform appropriate due diligence, and develop and present to the Board of Trustees a recommendation as to any such successor, replacement, or additional Sub-Adviser;
(k) designate and compensate from its own resources such personnel as the Adviser may consider necessary or appropriate to the performance of its services hereunder; and
(l) perform such other review and reporting functions as the Board of Trustees shall reasonably request consistent with this Agreement and applicable law.
10.
(a) The Fund agrees to pay to the Adviser, and the Adviser agrees to accept, as full compensation for all administrative and investment management services furnished or provided to the Fund and as full reimbursement for all expenses assumed by the Adviser, a management fee equal to the amount specified for the Fund on Schedule A .
(b) The management fees shall be accrued daily by the Fund and paid to the Adviser at the end of each calendar month.
(c) To the extent that the gross operating costs and expenses of the Fund (excluding any interest taxes, brokerage commissions, and, with the prior written approval of any state securities commission requiring same, any extraordinary expenses, such as litigation) exceed the allowable expense limitations of the state in which shares of the Fund are registered for sale having the most stringent expense reimbursement provisions, the Adviser shall reimburse the Fund for the amount of such excess.
(d) The management fee payable by the Fund hereunder shall be reduced to the extent that an affiliate of the Adviser has actually received cash payments of tender offer solicitation fees less certain costs and expenses incurred in connection therewith, as referred to in Paragraph 6 herein.
11. The Adviser agrees that neither it nor any of its officers or employees shall take any short position in the capital stock of the Fund. This prohibition shall not prevent the purchase of such shares by any of the officers and directors or bona fide employees of the Adviser or any trust, pension, profit-sharing or other benefit plan for such persons or affiliates thereof, at a price not less than the net asset value thereof at the time of purchase, as allowed pursuant to rules promulgated under the 1940 Act, as amended.
12. Nothing herein contained shall be deemed to require the Fund to take any action contrary to the Declaration of Fund or By-Laws of the Fund, or any applicable statute or regulation, or to relieve or deprive the Trustees of the Fund of its responsibility for and control of the conduct of the affairs of the Fund.
13.
(a) In the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of obligations or duties hereunder on the part of the Adviser, the Adviser shall not be subject to liability to the Fund, or to any shareholder of the Fund, for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security by the Fund.
(b) Notwithstanding the foregoing, the Adviser agrees to reimburse the Fund for any and all costs, expenses, and counsel and Trustees fees reasonably incurred by the Fund in the preparation, printing and distribution of proxy statements, amendments to its Registration Statement, the holding of meetings of its shareholders or Trustees, the conduct of factual investigations, any legal or administrative proceedings (including any applications for exemptions or determinations by the Securities and Exchange Commission) which the Fund incurs as a result of action or inaction of the Adviser or any of its shareholders where the action or inaction necessitating such expenditures (i) is directly or indirectly related to any transactions or proposed transaction in the shares or control of the Adviser or its affiliates (or litigation related to any pending or proposed future transaction in such shares or control) which shall have been undertaken without the prior, express approval of the Funds Trustees, or (ii) is within the
sole control of the Adviser or any of its affiliates or any of their officers, directors, employees or shareholders. The Adviser shall not be obligated pursuant to the provisions of this subparagraph 12(b), to reimburse the Fund for any expenditures related to the institution of an administrative proceeding or civil litigation by the Fund or by a Fund shareholder seeking to recover all or a portion of the proceeds derived by any shareholder of the Adviser or any of its affiliates from the sale of his shares of the Adviser, or similar matters. So long as this Agreement is in effect, the Adviser shall pay to the Fund the amount due for expenses subject to this subparagraph 12(b) within thirty (30) days after a bill or statement has been received by the Fund therefor. This provision shall not be deemed to be a waiver of any claim the Fund may have or may assert against the Adviser or others or costs, expenses, or damages heretofore incurred by the Fund for costs, expenses, or damages the Fund may hereafter incur which are not reimbursable to it hereunder.
(c) No provision of this Agreement shall be construed to protect any director or officer of the Fund, or of the Adviser, from liability in violation of Sections 17(h) and (i) of the 1940 Act.
14. This Agreement shall become effective on the date first written above, subject to the condition that the Funds Trustees, including a majority of those Trustees who are not interested persons (as such term is defined in the 1940 Act) of the Adviser, and the shareholders of the Fund, shall have approved this Agreement. Unless terminated as provided herein, the Agreement shall continue in full force and effect through two years from the effective date of this Agreement, and shall continue from year to year thereafter so long as such continuation is approved at least annually by (i) the Trustees of the Fund or by the vote of a majority of the outstanding voting securities of the Fund, and (ii) the vote of a majority of the Trustees of the Fund who are not parties to this Agreement or interested persons thereof, cast in person at a meeting called for the purpose of voting on such approval.
15. This Agreement may be terminated at any time, without payment of any penalty, by the Trustees of the Fund or by vote of a majority of the outstanding voting securities of the Fund, upon sixty (60) days written notice to the Adviser, and by the Adviser upon sixty (60) days written notice to the Fund.
16. This Agreement shall terminate automatically in the event of any transfer or assignment thereof, as defined in the 1940 Act, as amended.
17. This Agreement may not be transferred, assigned, sold or in any manner hypothecated or pledged without the affirmative vote or written consent of the holders of a majority of the outstanding voting securities of the Fund.
18. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule, or otherwise, the remainder of this Agreement shall not be affected thereby.
19. The term majority of the outstanding voting securities of the Fund shall have the meaning as set forth in the 1940 Act, as amended.
20. This Agreement shall be governed by the laws of the State of New York, provided that nothing herein shall be construed in a manner inconsistent with the 1940 Act, the Investment Advisors Act of 1940, or any rules or orders of the SEC thereunder.
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IN WITNESS WHEREOF , the parties hereto have caused this instrument to be executed as of the day and year first above written.
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ING PRIME RATE TRUST |
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By: |
/s/ Kimberly A. Anderson |
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Kimberly A. Anderson |
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Senior Vice President |
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ING INVESTMENTS, LLC |
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By: |
/s/ Todd Modic |
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Todd Modic |
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Senior Vice President |
SCHEDULE A
with respect to the
INVESTMENT MANAGEMENT AGREEMENT
between
ING PRIME RATE TRUST
and
ING INVESTMENTS, LLC
Series |
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Effective Date |
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Annual Investment Management Fee
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ING Prime Rate Trust |
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May 7, 2013 |
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0.80 |
% |
* Managed Assets shall mean the Funds average daily gross asset value, minus the sum of the Funds accrued and unpaid dividends on any outstanding preferred shares and accrued liabilities (other than liabilities for the principal amount of any borrowings incurred, commercial paper or notes issued by the Fund and the liquidation preference of any outstanding preferred shares.
Exhibit 2(g)(2)
SUB-ADVISORY AGREEMENT
ING PRIME RATE TRUST
AGREEMENT dated May 7, 2013, between ING Investments, LLC, an Arizona limited liability company (the Manager), and ING Investment Management Co. LLC, a Delaware limited liability company (the Sub-Adviser).
WHEREAS , ING Prime Rate Trust (the Fund) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a closed-end, management investment company; and
WHEREAS , the Fund is authorized to issue separate series, each series having its own investment objective or objectives, policies, and limitations; and
WHEREAS , pursuant to an Investment Management Agreement, dated May 7, 2013, as amended (the Investment Management Agreement), a copy of which has been provided to the Sub-Adviser, the Fund has retained the Manager to render advisory and management services with respect to certain of the Funds series; and
WHEREAS , pursuant to authority granted to the Manager in the Investment Management Agreement, the Manager wishes to retain the Sub-Adviser to furnish investment advisory services the Fund, and the Sub-Adviser is willing to furnish such services to the Fund and the Manager.
NOW, THEREFORE , in consideration of the premises and the promises and mutual covenants herein contained, it is agreed between the Manager and the Sub-Adviser as follows:
1. Appointment . The Manager hereby appoints the Sub-Adviser to act as the investment adviser and manager to the Fund for the periods and on the terms set forth in this Agreement. The Sub-Adviser accepts such appointment and agrees to furnish the services herein set forth for the compensation herein provided. To the extent that the Sub-Adviser is not the only person providing investment advisory services to the Fund, the term Fund shall be interpreted for purposes of this Agreement to include those assets of the Fund over which the Sub-Adviser is directed by the Manager to provide investment advisory services.
2. Sub-Adviser Duties . Subject to the supervision of the Funds Board of Trustees and the Manager, the Sub-Adviser will provide a continuous investment program for the Funds portfolio and determine in its discretion the composition of the assets of the Funds portfolio, including determination of the purchase, retention, or sale of the securities, cash, and other investments contained in the portfolio. The Sub-Adviser will provide investment research and conduct a continuous program of evaluation, investment, sales, and reinvestment of the Funds assets by determining the securities and other investments that shall be purchased, entered into, sold, closed, or exchanged for the Fund, when these transactions should be executed, and what portion of the assets of the Fund should be held in the various securities and other investments in which it may invest. To the extent permitted by the investment policies of the Fund, the Sub-Adviser shall make decisions for the Fund as to foreign currency matters and make determinations as to and execute and perform foreign currency exchange contracts on behalf of
the Fund. The Sub-Adviser will provide the services under this Agreement in accordance with the Funds investment objective or objectives, policies, and restrictions as stated in the Funds Registration Statement filed with the Securities and Exchange Commission (SEC), as amended, copies of which shall be sent to the Sub-Adviser by the Manager prior to the commencement of this Agreement and promptly following any such amendment. The Sub-Adviser further agrees as follows:
(a) The Sub-Adviser will conform with the 1940 Act and all rules and regulations thereunder, all other applicable federal and state laws and regulations, with any applicable procedures adopted by the Funds Board of Trustees of which the Sub-Adviser has been sent a copy, and the provisions of the Registration Statement of the Fund filed under the Securities Act of 1933 (the 1933 Act) and the 1940 Act, as supplemented or amended, of which the Sub-Adviser has received a copy, and with the Managers portfolio manager operating policies and procedures as in effect on the date hereof, as such policies and procedures may be revised or amended by the Manager and agreed to by the Sub-Adviser. In carrying out its duties under the Sub-Adviser Agreement, the Sub-Adviser will comply with the following policies and procedures:
(i) The Sub-Adviser will manage the Fund so that it meets the income and asset diversification requirements of Section 851 of the Internal Revenue Code of 1986, as amended (the Code), and, if applicable, manage the Fund so that no action or omission on the part of the Sub-Adviser shall cause the Fund to fail to comply with the diversification requirements of Section 817(h) of the Code, and the regulations issued thereunder.
(ii) The Sub-Adviser will have no duty to vote any proxy solicited by or with respect to the issuers of securities in which assets of the Fund are invested in connection with annual and special meetings of equity stockholders, provided however, that the Sub-Adviser retains responsibility to vote or abstain from voting all solicitations with respect to non-equity portfolio securities and all portfolio securities for matters with regard to bankruptcy or related plans of reorganization unless the Manager gives the Sub-Adviser written instructions to the contrary. The Sub-Adviser will immediately forward any proxy it receives on behalf of the Fund solicited by or with respect to the issuers of securities in which assets of the Fund are invested to the Manager or to any agent of the Manager designated by the Manager in writing.
The Sub-Adviser will make appropriate personnel reasonably available for consultation for the purpose of reviewing with representatives of the Manager and/or the Board any proxy solicited by or with respect to the issuers of securities in which assets of the Fund are invested. Upon request, the Sub-Adviser will submit a written voting recommendation to the Manager for such proxies. In making such recommendations, the Sub-Adviser shall use its good faith judgment to act in the best interests of the Fund. The Sub-Adviser shall disclose to the best of its knowledge any conflict of interest with the issuers of securities that are the subject of such recommendation including whether such issuers are clients or are being solicited as clients of the Sub-Adviser or of its affiliates.
(iii) In connection with the purchase and sale of securities for the Fund, the Sub-Adviser will arrange for the transmission to the custodian and portfolio accounting agent for the Fund on a daily basis, such confirmation, trade tickets, and other documents and information, including, but not limited to, Cusip, Cedel, or other numbers that identify securities to be purchased or sold on behalf of the Fund, as may be reasonably necessary to enable the custodian and portfolio accounting agent to perform its administrative and recordkeeping responsibilities with respect to the Fund. With respect to portfolio securities to be settled through the Depository Fund Company, the Sub-Adviser will arrange for the prompt transmission of the confirmation of such trades to the Funds custodian and portfolio accounting agent.
(iv) The Sub-Adviser will assist the custodian and portfolio accounting agent for the Fund in determining or confirming, consistent with the procedures and policies stated in the Registration Statement for the Fund or adopted by the Board of Trustees, the value of any portfolio securities or other assets of the Fund for which the custodian and portfolio accounting agent seeks assistance from or identifies for review by the Sub-Adviser. The parties acknowledge that the Sub-Adviser is not a custodian of the Funds assets and will not take possession or custody of such assets.
(v) The Sub-Adviser will provide the Manager, no later than the 10th business day following the end of the Funds semi-annual period and fiscal year, a letter to shareholders (to be subject to review and editing by the Manager) containing a discussion of those factors referred to in Item 22(b)(7) of 1940 Act Form N-1A in respect of both the prior quarter and the fiscal year to date.
(vi) The Sub-Adviser will complete and deliver to the Manager a written compliance checklist in a form provided by the Manager for each month by the 10th business day of the following month.
(b) The Sub-Adviser will make available to the Fund and the Manager, promptly upon request, any of the Funds investment records and ledgers maintained by the Sub-Adviser (which shall not include the records and ledgers maintained by the custodian or portfolio accounting agent for the Fund) as are necessary to assist the Fund and the Manager to comply with requirements of the 1940 Act and the Investment Advisers Act of 1940 (the Advisers Act), as well as other applicable laws. The Sub-Adviser will furnish to regulatory authorities having the requisite authority any information or reports in connection with such services in respect to the Fund which may be requested in order to ascertain whether the operations of the Fund are being conducted in a manner consistent with applicable laws and regulations.
(c) The Sub-Adviser will provide reports to the Funds Board of Trustees for consideration at meetings of the Board of Trustees on the investment program for the Fund and the issuers and securities represented in the Funds portfolio, and will furnish the Funds Board of Trustees with respect to the Fund such periodic and special reports as the Trustees and the Manager may reasonably request.
(d) With respect to any investments, including, but not limited to, repurchase and reverse repurchase agreements, derivatives contracts, futures contracts, International Swaps and Derivatives Association, Inc. Master Agreements, and options on futures contracts (futures), which are permitted to be made by the Sub-Adviser in accordance with this Agreement and the investment objectives and strategies of the Series as outlined in the Registration Statement for the Fund, the Manager hereby authorizes and directs the Sub-Adviser to do and perform every act and thing whatsoever necessary or incidental in performing its duties and obligations under this Agreement including, but not limited to, executing as agent, on behalf of each Series, brokerage agreements and other documents to establish, operate and conduct all brokerage or other trading accounts, and executing as agent, on behalf of each Series, such agreements and other documentation as may be required for the purchase or sale, assignment, transfer and ownership of any permitted investment, including limited partnership agreements, repurchase and derivative master agreements, including any schedules and annexes to such agreements, releases, consents, elections and confirmations. The Manager acknowledges and understands that it will be bound by any such trading accounts established, and agreements and other documentation executed, by the Sub-Adviser for such investment purposes.
3. Broker-Dealer Selection . The Sub-Adviser is authorized to make decisions to buy and sell securities and other investments the Funds portfolio, broker-dealer selection, and negotiation of brokerage commission rates in effecting a security transaction. The Sub-Advisers primary consideration in effecting a security transaction will be to obtain the best execution for the Fund, taking into account the factors specified in the prospectus and/or statement of additional information for the Fund, and determined in consultation with the Adviser, which include price (including the applicable brokerage commission or dollar spread), the size of the order, the nature of the market for the security, the timing of the transaction, the reputation, the experience and financial stability of the broker-dealer involved, the quality of the service, the difficulty of execution, and the execution capabilities and operational facilities of the firm involved, and the firms risk in positioning a block of securities. Accordingly, the price to the Fund in any transaction may be less favorable than that available from another broker-dealer if the difference is reasonably justified, in the judgment of the Sub-Adviser in the exercise of its fiduciary obligations to the Fund, by other aspects of the portfolio execution services offered. Subject to such policies as the Funds Board of Trustees or Manager may determine and consistent with Section 28(e) of the Securities Exchange Act of 1934, the Sub-Adviser shall not be deemed to have acted unlawfully or to have breached any duty created by this Agreement or otherwise solely by reason of its having caused the Fund to pay a broker-dealer for effecting a portfolio investment transaction in excess of the amount of commission another broker-dealer would have charged for effecting that transaction, if the Sub-Adviser determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker-dealer, viewed in terms of either that particular transaction or the Sub-Advisers or the Managers overall responsibilities with respect to the Fund and to their respective other clients as to which they exercise investment discretion. The Sub-Adviser will consult with the Manager to the end that portfolio transactions on behalf of the Fund are directed to broker-dealers on the basis of criteria reasonably considered appropriate by the Manager. To the extent consistent with these standards, the Sub-Adviser is further authorized to allocate the orders placed by it on behalf of the Fund to the Sub-Adviser if it is registered as a broker-dealer with the SEC, to an affiliated broker-dealer, or to such brokers and dealers who
also provide research or statistical material, or other services to the Fund, the Sub-Adviser, or an affiliate of the Sub-Adviser. Such allocation shall be in such amounts and proportions as the Sub-Adviser shall determine consistent with the above standards, and the Sub-Adviser will report on said allocation regularly to the Funds Board of Trustees indicating the broker-dealers to which such allocations have been made and the basis therefor.
4. Disclosure about Sub-Adviser . The Sub-Adviser has reviewed the most recent Post-Effective Amendment to the Registration Statement for the Fund filed with the SEC that contains disclosure about the Sub-Adviser, and represents and warrants that, with respect to the disclosure about the Sub-Adviser or information relating, directly or indirectly, to the Sub-Adviser, such Registration Statement contains, as of the date hereof, no untrue statement of any material fact and does not omit any statement of a material fact which was required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. The Sub-Adviser further represents and warrants that it is a duly registered investment adviser under the Advisers Act and will maintain such registration so long as this Agreement remains in effect. The Sub-Adviser will provide the Manager with a copy of the Sub-Advisers Form ADV, Part II at the time the Form ADV is filed with the SEC.
5. Expenses . During the term of this Agreement, the Sub-Adviser will pay all expenses incurred by it and its staff and for their activities in connection with its portfolio management duties under this Agreement. The Manager or the Fund shall be responsible for all the expenses of the Funds operations. In addition, if the Fund is required, under applicable law, to supplement the Registration Statement because of a change requested by the Sub-Adviser, the Sub-Adviser will reimburse the Fund and/or the Manager for the cost of preparing, printing and distributing such supplement, unless the Sub-Adviser is requesting the change in order to comply with an applicable law, rule or regulation.
6. Compensation . For the services provided to the Fund, the Manager will pay the Sub-Adviser an annual fee equal to the amount specified for the Fund, payable monthly in arrears. The fee will be appropriately prorated to reflect any portion of a calendar month that this Agreement is not in effect among the parties. In accordance with the provisions of the Investment Management Agreement, the Manager is solely responsible for the payment of fees to the Sub-Adviser, and the Sub-Adviser agrees to seek payment of its fees solely from the Manager; provided, however, that if the Fund fails to pay the Manager all or a portion of the Investment Management fee under said Investment Management Agreement when due, and the amount that was paid is insufficient to cover the Sub-Advisers fee under this Agreement for the period in question, then the Sub-Adviser may enforce against the Fund any rights it may have as a third-party beneficiary under the Investment Management Agreement and the Manager will take all steps appropriate under the circumstances to collect the amount due from the Fund.
8. Marketing Materials .
(a) During the term of this Agreement, the Sub-Adviser agrees to furnish the Manager at its principal office for prior review and approval by the Manager all written and/or printed materials, including but not limited to, PowerPoint Ò or slide presentations, news releases, advertisements, brochures, fact sheets and other promotional, informational or marketing materials (the Marketing Materials) for internal use or
public dissemination, that are produced or are for use or reference by the Sub-Adviser, its affiliates or other designees, broker-dealers or the public in connection with the Fund and Sub-Adviser shall not use any such materials if the Manager reasonably objects in writing within five business days (or such other period as may be mutually agreed) after receipt thereof. Marketing Materials may be furnished to the Manager by first class or overnight mail, facsimile transmission equipment, electronic delivery or hand delivery.
(b) During the term of this Agreement, the Manager agrees to furnish the Sub-Adviser at its principal office all prospectuses, proxy statements, reports to shareholders, or Marketing Materials prepared for distribution to shareholders of the Fund, or the public that refer to the Sub-Adviser in any way, prior to the use thereof, and the Manager shall not use any such materials if the Sub-Adviser reasonably objects in writing within five business days (or such other period as may be mutually agreed) after receipt thereof. The Sub-Advisers right to object to such materials is limited to the portions of such materials that expressly relate to the Sub-Adviser, its services and its clients. The Manager agrees to use its reasonable best efforts to ensure that materials prepared by its employees or agents or its affiliates that refer to the Sub-Adviser or its clients in any way are consistent with those materials previously approved by the Sub-Adviser as referenced in the first sentence of this paragraph. Marketing Materials may be furnished to the Sub-Adviser by first class or overnight mail, facsimile transmission equipment, electronic delivery or hand delivery.
9. Compliance .
(a) The Sub-Adviser agrees to use reasonable compliance techniques as the Manager or the Board of Trustees may adopt, including any written compliance procedures.
(b) The Sub-Adviser agrees that it shall promptly notify the Manager and the Fund: (1) in the event that the SEC has censured the Sub-Adviser; placed limitations upon its activities, functions or operations; suspended or revoked its registration as an investment adviser; or has commenced proceedings or an investigation that may result in any of these actions; or (2) upon having a reasonable basis for believing that the Fund has ceased to qualify or might not qualify as a regulated investment company under Subchapter M of the Internal Revenue Code. The Sub-Adviser further agrees to notify the Manager and the Fund promptly of any material fact known to the Sub-Adviser respecting or relating to the Sub-Adviser that is not contained in the Registration Statement or prospectus for the Fund (which describes the Fund), or any amendment or supplement thereto, or if any statement contained therein that becomes untrue in any material respect.
(c) The Manager agrees that it shall promptly notify the Sub-Adviser: (1) in the event that the SEC has censured the Manager or the Fund; placed limitations upon either of their activities, functions, or operations; suspended or revoked the Managers registration as an investment adviser; or has commenced proceedings or an investigation that may result in any of these actions; or (2) upon having a reasonable basis for believing that the Fund has ceased to qualify or might not qualify as a regulated investment company under Subchapter M of the Internal Revenue Code.
10. Books and Records . The Sub-Adviser hereby agrees that all records which it maintains for the Fund may be the property of the Fund and further agrees to surrender promptly to the Fund any of such records upon the Funds or the Managers request in compliance with the requirements of Rule 31a-3 under the 1940 Act, although the Sub-Adviser may, at its own expense, make and retain a copy of such records. The Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule 31a-l under the 1940 Act.
11. Cooperation; Confidentiality . Each party to this Agreement agrees to cooperate with the other party and with all appropriate governmental authorities having the requisite jurisdiction (including, but not limited to, the SEC) in connection with any investigation or inquiry relating to this Agreement or the Fund. Subject to the foregoing, the Sub-Adviser shall treat as confidential all information pertaining to the Fund and actions of the Fund, the Manager and the Sub-Adviser, and the Manager shall treat as confidential and use only in connection with the Fund all information furnished to the Fund or the Manager by the Sub-Adviser, in connection with its duties under the Agreement except that the aforesaid information need not be treated as confidential if required to be disclosed under applicable law, if generally available to the public through means other than by disclosure by the Sub-Adviser or the Manager, or if available from a source other than the Manager, Sub-Adviser or this Fund.
12. Non-Exclusivity . The services of the Sub-Adviser to the Fund are not to be deemed to be exclusive, and the Sub-Adviser shall be free to render investment advisory or other services to others (including other investment companies) and to engage in other activities, provided, however, that the Sub-Adviser may not consult with any other sub-adviser of the Fund concerning transactions in securities or other assets for any investment portfolio of the Fund,, except that such consultations are permitted between the current and successor sub-advisers of the Fund in order to effect an orderly transition of sub-advisory duties so long as such consultations are not concerning transactions prohibited by Section 17(a) of the 1940 Act.
13. Representations Respecting Sub-Adviser . The Manager agrees that neither the Manager, nor affiliated persons of the Manager, shall give any information or make any representations or statements in connection with the sale of shares of the Fund concerning the Sub-Adviser or the Fund other than the information or representations contained in the Registration Statement, prospectus, or statement of additional information for the Funds shares, as they may be amended or supplemented from time to time, or in reports or proxy statements for the Fund, or in sales literature or other promotional material approved in advance by the Sub-Adviser, except with the prior permission of the Sub-Adviser.
14. Control . Notwithstanding any other provision of the Agreement, it is understood and agreed that the Fund shall at all times retain the ultimate responsibility for and control of all functions performed pursuant to this Agreement and has reserved the right to reasonably direct any action hereunder taken on its behalf by the Sub-Adviser.
15. Liability . Except as may otherwise be required by the 1940 Act or the rules thereunder or other applicable law, the Manager agrees that the Sub-Adviser, any affiliated person of the Sub-Adviser, and each person, if any, who, within the meaning of Section 15 of the 1933 Act controls the Sub-Adviser: (1) shall bear no responsibility and shall not be subject to
any liability for any act or omission respecting the Fund; and (2) shall not be liable for, or subject to any damages, expenses, or losses in connection with, any act or omission connected with or arising out of any services rendered under this Agreement, except by reason of willful misfeasance, bad faith, or gross negligence in the performance of the Sub-Advisers duties, or by reason of reckless disregard of the Sub-Advisers obligations and duties under this Agreement.
16. Indemnification .
(a) The Manager agrees to indemnify and hold harmless the Sub-Adviser, any affiliated person of the Sub-Adviser, and each person, if any, who, within the meaning of Section 15 of the 1933 Act controls (controlling person) the Sub-Adviser (all of such persons being referred to as Sub-Adviser Indemnified Persons) against any and all losses, claims, damages, liabilities, or litigation (including legal and other expenses) to which a Sub-Adviser Indemnified Person may become subject under the 1933 Act, the 1940 Act, the Advisers Act, under any other statute, at common law or otherwise, arising out of the Managers responsibilities to the Fund which: (1) may be based upon the Managers negligence, willful misfeasance, or bad faith in the performance of its duties (which could include a negligent action or a negligent omission to act), or by reason of the Managers reckless disregard of its obligations and duties under this Agreement; or (2) may be based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or prospectus covering shares of the Fund, or any amendment thereof or any supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, unless such statement or omission was made in reliance upon information furnished to the Manager or the Fund or to any affiliated person of the Manager by a Sub-Adviser Indemnified Person; provided however, that in no case shall the indemnity in favor of the Sub-Adviser Indemnified Person be deemed to protect such person against any liability to which any such person would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of its duties, or by reason of its reckless disregard of obligations and duties under this Agreement.
(b) Notwithstanding Section 15 of this Agreement, the Sub-Adviser agrees to indemnify and hold harmless the Manager, any affiliated person of the Manager, and any controlling person of the Manager (all of such persons being referred to as Manager Indemnified Persons) against any and all losses, claims, damages, liabilities, or litigation (including legal and other expenses) to which a Manager Indemnified Person may become subject under the 1933 Act, 1940 Act, the Advisers Act, under any other statute, at common law or otherwise, arising out of the Sub-Advisers responsibilities as Sub-Adviser of the Fund which: (1) may be based upon the Sub-Advisers negligence, willful misfeasance, or bad faith in the performance of its duties (which could include a negligent action or a negligent omission to act), or by reason of the Sub-Advisers reckless disregard of its obligations and duties under this Agreement; or (2) may be based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or prospectus covering the shares of the Fund, or any amendment or supplement thereto, or the omission or alleged omission to state therein a material fact known or which should have been known to the Sub-Adviser and was required to be
stated therein or necessary to make the statements therein not misleading, if such a statement or omission was made in reliance upon information furnished to the Manager, the Fund, or any affiliated person of the Manager or Fund by the Sub-Adviser or any affiliated person of the Sub-Adviser; provided, however, that in no case shall the indemnity in favor of a Manager Indemnified Person be deemed to protect such person against any liability to which any such person would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence in the performance of its duties, or by reason of its reckless disregard of its obligations and duties under this Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this Section 16 with respect to any claim made against a Sub-Adviser Indemnified Person unless such Sub-Adviser Indemnified Person shall have notified the Manager in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Sub-Adviser Indemnified Person (or after such Sub-Adviser Indemnified Person shall have received notice of such service on any designated agent), but failure to notify the Manager of any such claim shall not relieve the Manager from any liability which it may have to the Sub-Adviser Indemnified Person against whom such action is brought except to the extent the Manager is prejudiced by the failure or delay in giving such notice. In case any such action is brought against the Sub-Adviser Indemnified Person, the Manager will be entitled to participate, at its own expense, in the defense thereof or, after notice to the Sub-Adviser Indemnified Person, to assume the defense thereof, with counsel satisfactory to the Sub-Adviser Indemnified Person. If the Manager assumes the defense of any such action and the selection of counsel by the Manager to represent the Manager and the Sub-Adviser Indemnified Person would result in a conflict of interests and therefore, would not, in the reasonable judgment of the Sub-Adviser Indemnified Person, adequately represent the interests of the Sub-Adviser Indemnified Person, the Manager will, at its own expense, assume the defense with counsel to the Manager and, also at its own expense, with separate counsel to the Sub-Adviser Indemnified Person, which counsel shall be satisfactory to the Manager and to the Sub-Adviser Indemnified Person. The Sub-Adviser Indemnified Person shall bear the fees and expenses of any additional counsel retained by it, and the Manager shall not be liable to the Sub-Adviser Indemnified Person under this Agreement for any legal or other expenses subsequently incurred by the Sub-Adviser Indemnified Person independently in connection with the defense thereof other than reasonable costs of investigation. The Manager shall not have the right to compromise on or settle the litigation without the prior written consent of the Sub-Adviser Indemnified Person if the compromise or settlement results, or may result in a finding of wrongdoing on the part of the Sub-Adviser Indemnified Person.
(d) The Sub-Adviser shall not be liable under Paragraph (b) of this Section 16 with respect to any claim made against a Manager Indemnified Person unless such Manager Indemnified Person shall have notified the Sub-Adviser in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Manager Indemnified Person (or after such Manager Indemnified Person shall have received notice of such service on any designated agent), but failure to notify the Sub-Adviser of any such claim shall not relieve the Sub-Adviser from any liability which it may have to the Manager Indemnified
Person against whom such action is brought except to the extent the Sub-Adviser is prejudiced by the failure or delay in giving such notice. In case any such action is brought against the Manager Indemnified Person, the Sub-Adviser will be entitled to participate, at its own expense, in the defense thereof or, after notice to the Manager Indemnified Person, to assume the defense thereof, with counsel satisfactory to the Manager Indemnified Person. If the Sub-Adviser assumes the defense of any such action and the selection of counsel by the Sub-Adviser to represent both the Sub-Adviser and the Manager Indemnified Person would result in a conflict of interests and therefore, would not, in the reasonable judgment of the Manager Indemnified Person, adequately represent the interests of the Manager Indemnified Person, the Sub-Adviser will, at its own expense, assume the defense with counsel to the Sub-Adviser and, also at its own expense, with separate counsel to the Manager Indemnified Person, which counsel shall be satisfactory to the Sub-Adviser and to the Manager Indemnified Person. The Manager Indemnified Person shall bear the fees and expenses of any additional counsel retained by it, and the Sub-Adviser shall not be liable to the Manager Indemnified Person under this Agreement for any legal or other expenses subsequently incurred by the Manager Indemnified Person independently in connection with the defense thereof other than reasonable costs of investigation. The Sub-Adviser shall not have the right to compromise on or settle the litigation without the prior written consent of the Manager Indemnified Person if the compromise or settlement results, or may result in a finding of wrongdoing on the part of the Manager Indemnified Person.
17. Duration and Termination .
(a) This Agreement shall become effective on the date first indicated above, subject to the condition that the Funds Board of Trustees, including a majority of those Trustees who are not interested persons (as such term is defined in the 1940 Act) of the Manager or the Sub-Adviser, and the shareholders of the Fund, shall have approved this Agreement. Unless terminated as provided herein, this Agreement shall remain in full force and effect through two years from the effective date of this Agreement and continue on an annual basis thereafter with respect to the Fund covered by this Agreement; provided that such annual continuance is specifically approved each year by: (1) the Board of Trustees of the Fund, or by the vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund; and (2) the vote of a majority of those Trustees who are not parties to this Agreement or interested persons (as such term is defined in the 1940 Act) of any such party to this Agreement cast in person at a meeting called for the purpose of voting on such approval. However, any approval of this Agreement by the holders of a majority of the outstanding shares (as defined in the 1940 Act) of the Fund shall be effective to continue this Agreement with respect to the Fund notwithstanding: (1) that this Agreement has not been approved by the holders of a majority of the outstanding shares of any other series of the Fund; or (2) that this Agreement has not been approved by the vote of a majority of the outstanding shares of the Fund, unless such approval shall be required by any other applicable law or otherwise.
Notwithstanding the foregoing, this Agreement may be terminated with respect to the Fund covered by this Agreement: (1) by the Manager at any time, upon sixty days
written notice to the Sub-Adviser and the Fund; (2) at any time without payment of any penalty by the Fund, by the Funds Board of Trustees or a majority of the outstanding voting securities of the Fund, upon sixty days written notice to the Manager and the Sub-Adviser; or (3) by the Sub-Adviser upon three months written notice unless the Fund or the Manager requests additional time to find a replacement for the Sub-Adviser, in which case the Sub-Adviser shall allow the additional time requested by the Fund or Manager not to exceed three additional months beyond the initial three-month notice period; provided, however, that the Sub-Adviser may terminate this Agreement at any time without penalty, effective upon written notice to the Manager and the Fund, in the event either the Sub-Adviser (acting in good faith) or the Manager ceases to be registered as an investment adviser under the Advisers Act or otherwise becomes legally incapable of providing investment management services pursuant to its respective contract with the Fund, or in the event the Manager becomes bankrupt or otherwise incapable of carrying out its obligations under this Agreement, or in the event that the Sub-Adviser does not receive compensation for its services from the Manager or the Fund as required by the terms of this Agreement.
In the event of termination for any reason, all records of the Fund shall promptly be returned to the Manager or the Fund, free from any claim or retention of rights in such record by the Sub-Adviser, although the Sub-Adviser may, at its own expense, make and retain a copy of such records. This Agreement shall automatically terminate in the event of its assignment (as such term is described in the 1940 Act). In the event this Agreement is terminated or is not approved in the manner described above, the Sections or Paragraphs numbered 10, 11, 13, 14, 15, and 16 of this Agreement shall remain in effect, as well as any applicable provision of this Section numbered 18 and, to the extent that only amounts are owed to the Sub-Adviser as compensation for services rendered while the Agreement was in effect, Section 6.
(b) Notices. Any notice must be in writing and shall be sufficiently given: (1) when delivered in person; (2) when dispatched by telegram or electronic facsimile transfer (confirmed in writing by postage prepaid first class air mail simultaneously dispatched); (3) when sent by internationally recognized overnight courier service (with receipt confirmed by such overnight courier service); or (4) when sent by registered or certified mail, to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party.
If to the Fund:
ING Prime Rate Trust
7337 East Doubletree Ranch Road, Suite 100
Scottsdale, AZ 85258-2034
Attention: Kimberly A. Anderson
If to the Sub-Adviser:
ING Investment Management Co. LLC
One Orange Way, C1-N
Windsor, CT 06095
Attention: Christopher Kurtz
With a copy to:
ING Investment Management Co. LLC
230 Park Avenue
New York, NY 10169
Attention: Gerald Lins
If to the Manager:
ING Investments, LLC
7337 East Doubletree Ranch Road
Suite 100
Scottsdale, AZ 85258
Attention: Michael J. Roland
18. Amendments . No provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, and no amendment of this Agreement shall be effective until approved as required by applicable law.
19. Miscellaneous .
(a) This Agreement shall be governed by the laws of the State of New York, provided that nothing herein shall be construed in a manner inconsistent with the 1940 Act, the Advisers Act or rules or orders of the SEC thereunder, and without regard for the conflicts of laws principle thereof. The term affiliate or affiliated person as used in this Agreement shall mean affiliated person as defined in Section 2(a)(3) of the 1940 Act.
(b) The Manager and the Sub-Adviser acknowledge that the Fund enjoys the rights of a third-party beneficiary under this Agreement, and the Manager acknowledges that the Sub-Adviser enjoys the rights of a third party beneficiary under the Investment Management Agreement.
(c) The captions of this Agreement are included for convenience only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect.
(d) To the extent permitted under Section 17 of this Agreement, this Agreement may only be assigned by any party with the prior written consent of the other parties.
(e) If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby, and to this extent, the provisions of this Agreement shall be deemed to be severable.
(f) Nothing herein shall be construed as constituting the Sub-Adviser as an agent or co-partner of the Manager, or constituting the Manager as an agent or co-partner of the Sub-Adviser.
(g) This Agreement may be executed in counterparts.
(REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
IN WITNESS WHEREOF , the parties hereto have caused this instrument to be executed as of the day and year first above written.
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ING INVESTMENTS, LLC |
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By: |
/s/ Todd Modic |
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Todd Modic |
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Senior Vice President |
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ING INVESTMENT MANAGEMENT CO. LLC |
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By: |
/s/ Christopher Kurtz |
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Name: |
Christopher Kurtz |
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Title: |
VP Finance |
SCHEDULE A
with respect to the
SUB-ADVISORY AGREEMENT
between
ING INVESTMENTS, LLC
and
ING INVESTMENT MANAGEMENT CO. LLC
Series |
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Effective Date |
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Annual Sub-Advisory Fee
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ING Prime Rate Trust |
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May 7, 2013 |
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0.3600 |
% |
* Managed Assets are defined as the Funds average daily gross asset value, minus the sum of the Funds accrued and unpaid dividends on any outstanding preferred shares and accrued liabilities (other than liabilities for the principal amount of any borrowings incurred, commercial paper or notes issued by the Fund, and the liquidation preference of any outstanding preferred shares).
Exhibit 2(h)(1)
DISTRIBUTION AGREEMENT
(5 MILLION SHARES)
Parties: |
ING Prime Rate Trust (the Trust) |
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ING Investments Distributor, LLC (the Distributor) |
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Date: |
May 7, 2013 |
WHEREAS, ING Prime Rate Trust is a Massachusetts business trust operating as a closed-end management investment company;
WHEREAS, the Trust has filed a registration statement (the Registration Statement) on Form N-2 under the Investment Company Act of 1940, as amended (the 1940 Act) (File No. 811-5410) and under the Securities Act of 1933, as amended (the 1933 Act) (File No. 333-61831) to register shares of the Trust which may be issued and sold from time to time;
WHEREAS, the Distributor is registered as a broker-dealer under the provisions of the Securities Exchange Act of 1934 and is a member of the Financial Industry Regulatory Authority; and
WHEREAS, the Trusts Board of Trustees (the Trustees) has adopted a resolution approving this Distribution Agreement (the Agreement), and such resolution was adopted at a meeting of the Trustees, at which a majority of Trustees, including a majority of the Trusts Trustees who are not interested persons (as defined in the 1940 Act) of the Trusts investment manager or its affiliates, were present and voted in favor of the said resolution approving this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. Appointment of Distributor; Acceptance . The Trust hereby appoints the Distributor as the principal underwriter and distributor for shares of the Trust to be issued pursuant to the Registration Statement (the Shares) and the Distributor hereby accepts such appointment and agrees to serve as the principal underwriter and distributor for the Shares.
2. Sale of Shares . The Distributor will use reasonable efforts to promote the sale of the Shares, but the Distributor is not obligated to sell any specific number of Shares. The Shares will only be sold on such days as shall be agreed to between the Distributor and the Trust. The Trust will deliver to the Distributor such Shares as the Distributor may sell.
3. Offering Price . The public offering price per Share shall be determined in accordance with the then current prospectus of the Trust under the Registration Statement. In no event shall the public offering price be less than the current net asset value per Share (the Minimum Price). The Distributor shall suspend the sale of Shares if the per share price of the Shares is less than the Minimum Price.
4. Sales Commissions and Discounts . The Distributor shall not be entitled to receive any sales commission or discount from the Trust for its services hereunder.
5. Furnishing of Information . The Trust will furnish the Distributor with such number of copies of the Registration Statement as the Distributor shall reasonably request, and the Trust warrants to the Distributor that the statements therein contained are true and correct as of the date of the Registration Statement, as it may be amended or supplemented from time to time. The Trust will also furnish the Distributor with such other information that the Distributor may reasonably request for use in connection with the distribution of the Shares, including, at least annually, audited financial statements of the Trusts books and accounts certified by independent public accountants.
6. Conduct of Business . Other than the currently effective Prospectus and Statement of Additional Information, the Distributor will not use any sales materials or statements except literature or advertising which conforms to the requirements of federal and state securities laws and regulations and which have been filed, where necessary, with the appropriate regulatory authorities. The Distributor will furnish to the Trust copies of all material prior to its use and no such material shall be published if the Trust shall reasonably and promptly object.
7. Compliance with Law . The Distributor shall comply with applicable federal and state laws and regulations where the Trusts Shares are offered for sale and conduct its affairs with the Trust and with dealers, brokers or investors in accordance with the Conduct Rules of the National Association of Securities Dealers, Inc.
8. Other Activities . The Distributors services pursuant to this Agreement shall not be deemed to be exclusive, and the Distributor may render similar services and act as an underwriter, distributor or dealer for other investment companies in the offering of their shares.
9. Suspension of Sales . The Trust reserves the right at all times to suspend or limit the public offering of the Shares upon written notice to the Distributor, and to reject any order in whole or in part.
10. Payment of Expenses . The Distributor shall bear all expenses incurred by it in connection with its duties and activities under this Agreement. The Trust shall bear all costs and expenses of the Trust, including expenses (including legal fees) pertaining to the preparation and filing of the Registration Statement and Prospectus and any amendments or supplements thereto, and expenses pertaining to the preparation, printing and distribution of any reports or communications to shareholders, including Prospectuses and Statements of Additional Information, annual or interim reports or proxy materials.
11. Agent of Trust . Any person, even though also an officer, employee or agent of the Distributor, who may be or become an officer, Trustee, employee or agent of the Trust, shall be deemed, when rendering services to the Trust or acting in any business of the Trust, to be rendering such services to or acting solely for the Trust and not as an officer, partner, employee or agent or one under the control or direction of the Distributor even though paid by the Distributor.
12. Records . All records maintained by the Distributor in connection with this Agreement shall be the property of the Trust and shall be returned to the Trust upon termination of this Agreement, free from any claims or retention of rights by the Distributor. The Distributor shall keep confidential any information obtained pursuant to this Agreement and shall disclose such information only if the Trust has authorized such disclosure or if such disclosure is expressly required by applicable federal or state regulatory authorities.
13. Duration and Termination . This Agreement shall take effect on the date of its execution and shall continue in effect, unless sooner terminated as provided herein, for two years from such date and shall continue from year to year thereafter so long as such continuance is specifically approved at least annually (a) by the vote of a majority of those Trustees who are not interested persons, cast in person at a meeting called for the purpose of voting on such approval, and (b) either by a majority of the Trustees of the Trust or by a majority vote (as defined in the Prospectus) of the shareholders of the Trust; provided, however , that this Agreement may be terminated by the Trust or by a majority vote of the shareholders of the Trust on 60 days written notice to the Distributor, or by the Distributor at any time on 60 days written notice to the Trust, in all cases without the payment of any penalty. This Agreement will automatically and immediately terminate in the event of its assignment (as described in the 1940 Act).
14. Liability of Distributor . The Distributor shall not be liable to the Trust for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the matters to which this Agreement relates, except a loss resulting from the Distributors willful misfeasance, bad faith or negligence in the performance of its duties, or by reason of its reckless disregard of its obligations and duties under this Agreement.
15. Agreement and Declaration of Trust and Limitation of Liability . A copy of the Agreement and Declaration of Trust of the Trust is on file with the Secretary of State of the Commonwealth of Massachusetts, and notice is hereby given that this Agreement is executed by an officer of the Trust on behalf of the Trustees of the Trust, as Trustees and not individually, and that the obligations of this Agreement with respect to the Trust shall be binding upon the assets and properties of the Trust only and shall not be binding upon the assets or properties of the Trustees, officers, employees, agents or shareholders of the Trust individually.
16. Notices . Notices of any kind to be given to the Distributor by the Trust shall be in writing and shall be duly given if mailed, first class postage prepaid, or delivered to the Distributor at its principal place of business or at such other address or to such individual as shall be specified by the Distributor to the Trust. Notices of any kind to be given to the Trust shall be in writing and shall be duly given if mailed, first class postage prepaid, or delivered to the Trust at its principal place of business or at such other address or to such individual as shall be specified by the Trust.
17. Reports . The Distributor shall prepare reports to the Trustees of the Trust showing such information as from time to time shall be reasonably requested by the Trustees or as are required of the Distributor by applicable laws and regulations.
18. Independent Contractor Status . The Distributor shall for all purposes herein provided be deemed to be an independent contractor and, unless otherwise expressly provided or authorized, shall have no authority to act for or represent the Trust in any way or otherwise be deemed an agent of the Trust. It is understood and agreed that the Distributor, by separate agreement with the Trust, may also serve the Trust in other capacities.
19. Miscellaneous . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original. This Agreement shall be governed by the laws of the State of New York, provided that nothing herein shall be construed in a manner inconsistent with the 1940 Act, the Securities Exchange Act of 1934, as amended, or any rule or order of the
Securities and Exchange Commission. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby and, to this extent, the provisions of this Agreement shall be deemed to be severable.
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ING PRIME RATE TRUST |
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By: |
/s/ Kimberly A. Anderson |
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Kimberly A. Anderson |
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Senior Vice President |
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ING INVESTMENTS DISTRIBUTOR, LLC |
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By: |
/s/ Michael J. Roland |
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Michael J. Roland |
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Executive Vice President |
Exhibit 2(j)(5)(i)
AMENDED SCHEDULE A
with respect to the
ALLOCATION AGREEMENT DIRECTORS & OFFICERS LIABILITY
(September 12, 2013)
ING ASIA PACIFIC HIGH DIVIDEND EQUITY INCOME FUND |
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ING BALANCED PORTFOLIO, INC. |
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ING EMERGING MARKETS HIGH DIVIDEND EQUITY FUND |
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ING EQUITY TRUST |
ING Growth Opportunities Fund |
ING Large Cap Value Fund |
ING MidCap Opportunities Fund |
ING Mid Cap Value Fund |
ING Real Estate Fund |
ING SmallCap Opportunities Fund |
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ING FUNDS TRUST |
ING Floating Rate Fund |
ING GNMA Income Fund |
ING High Yield Bond Fund |
ING Intermediate Bond Fund |
ING Short Term Bond Fund |
ING Strategic Income Fund |
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ING GLOBAL ADVANTAGE AND PREMIUM OPPORTUNITY FUND |
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ING GLOBAL EQUITY DIVIDEND AND PREMIUM OPPORTUNITY FUND |
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ING INFRASTRUCTURE, INDUSTRIALS AND MATERIALS FUND |
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ING INTERMEDIATE BOND PORTFOLIO |
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ING INTERNATIONAL HIGH DIVIDEND EQUITY INCOME FUND |
ING INVESTORS TRUST |
ING American Funds Asset Allocation Portfolio |
ING American Funds Global Growth and Income Portfolio |
ING American Funds International Growth and Income Portfolio |
ING American Funds International Portfolio |
ING American Funds World Allocation Portfolio |
ING BlackRock Health Sciences Opportunities Portfolio(1) |
ING BlackRock Inflation Protected Bond Portfolio |
ING BlackRock Large Cap Growth Portfolio(1) |
ING Bond Portfolio |
ING Clarion Global Real Estate Portfolio |
ING Clarion Real Estate Portfolio |
ING DFA World Equity Portfolio |
ING FMR SM Diversified Mid Cap Portfolio(1) |
ING Franklin Income Portfolio |
ING Franklin Mutual Shares Portfolio(1) |
ING Franklin Templeton Founding Strategy Portfolio |
ING Global Perspectives Portfolio |
ING Global Resources Portfolio(1) |
ING Invesco Growth and Income Portfolio |
ING JPMorgan Emerging Markets Equity Portfolio(1) |
ING JPMorgan Small Cap Core Equity Portfolio(1) |
ING Large Cap Growth Portfolio |
ING Large Cap Value Portfolio |
ING Limited Maturity Bond Portfolio(1) |
ING Liquid Assets Portfolio(1) |
ING Marsico Growth Portfolio(1) |
ING MFS Total Return Portfolio(1) |
ING MFS Utilities Portfolio |
ING Morgan Stanley Global Franchise Portfolio(1) |
ING Multi-Manager Large Cap Core Portfolio(1) |
ING PIMCO High Yield Portfolio(1) |
ING PIMCO Total Return Bond Portfolio(1) |
ING Retirement Conservative Portfolio |
ING Retirement Growth Portfolio |
ING Retirement Moderate Growth Portfolio |
ING Retirement Moderate Portfolio |
ING T. Rowe Price Capital Appreciation Portfolio(1) |
ING T. Rowe Price Equity Income Portfolio(1) |
ING T. Rowe Price International Stock Portfolio |
ING Templeton Global Growth Portfolio(1) |
ING U.S. Stock Index Portfolio(1) |
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ING MONEY MARKET PORTFOLIO |
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ING MUTUAL FUNDS |
ING Diversified Emerging Markets Debt Fund |
ING Diversified International Fund |
ING Emerging Markets Equity Dividend Fund |
ING Emerging Markets Equity Fund |
ING Global Bond Fund |
ING Global Equity Dividend Fund |
ING Global Natural Resources Fund |
ING Global Opportunities Fund |
ING Global Perspectives Fund |
ING Global Real Estate Fund |
ING International Core Fund |
ING International Real Estate Fund |
ING International Small Cap Fund |
ING International Value Equity Fund |
ING Multi-Manager International Equity Fund |
ING Russia Fund |
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ING PARTNERS, INC. |
ING American Century Small-Mid Cap Value Portfolio |
ING Baron Growth Portfolio |
ING Columbia Contrarian Core Portfolio |
ING Columbia Small Cap Value II Portfolio |
ING Fidelity® VIP Contrafund® Portfolio |
ING Fidelity® VIP Equity-Income Portfolio |
ING Fidelity® VIP Mid Cap Portfolio |
ING Global Bond Portfolio |
ING Index Solution 2015 Portfolio |
ING Index Solution 2020 Portfolio |
ING Index Solution 2025 Portfolio |
ING Index Solution 2030 Portfolio |
ING Index Solution 2035 Portfolio |
ING Index Solution 2040 Portfolio |
ING Index Solution 2045 Portfolio |
ING Index Solution 2050 Portfolio |
ING Index Solution 2055 Portfolio |
ING Index Solution Income Portfolio |
ING Invesco Comstock Portfolio |
ING Invesco Equity and Income Portfolio |
ING JPMorgan Mid Cap Value Portfolio |
ING Oppenheimer Global Portfolio |
ING PIMCO Total Return Portfolio |
ING Pioneer High Yield Portfolio |
ING Solution 2015 Portfolio |
ING Solution 2020 Portfolio |
ING Solution 2025 Portfolio |
ING Solution 2030 Portfolio |
ING Solution 2035 Portfolio |
ING Solution 2040 Portfolio |
ING Solution 2045 Portfolio |
ING Solution 2050 Portfolio |
ING Solution 2055 Portfolio |
ING Solution Aggressive Portfolio |
ING Solution Balanced Portfolio |
ING Solution Conservative Portfolio |
ING Solution Income Portfolio |
ING Solution Moderately Aggressive Portfolio |
ING Solution Moderately Conservative Portfolio |
ING T. Rowe Price Diversified Mid Cap Growth Portfolio |
ING T. Rowe Price Growth Equity Portfolio |
ING Templeton Foreign Equity Portfolio |
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ING PRIME RATE TRUST |
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ING RISK MANAGED NATURAL RESOURCES FUND |
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ING SENIOR INCOME FUND |
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ING SEPARATE PORTFOLIOS TRUST |
ING Emerging Markets Corporate Debt Fund |
ING Emerging Markets Hard Currency Debt Fund |
ING Emerging Markets Local Currency Debt Fund |
ING Investment Grade Credit Fund |
ING Retirement Solution 2020 Fund |
ING Retirement Solution 2025 Fund |
ING Retirement Solution 2030 Fund |
ING Retirement Solution 2035 Fund |
ING Retirement Solution 2040 Fund |
ING Retirement Solution 2045 Fund |
ING Retirement Solution 2050 Fund |
ING Retirement Solution 2055 Fund |
ING Retirement Solution Income Fund |
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ING SERIES FUND, INC |
ING Capital Allocation Fund |
ING Core Equity Research Fund |
ING Corporate Leaders 100 Fund |
ING Global Target Payment Fund |
ING Large Cap Growth Fund |
ING Money Market Fund |
ING Small Company Fund |
ING SMID Cap Equity Fund |
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ING STRATEGIC ALLOCATION PORTFOLIOS, INC. |
ING Strategic Allocation Conservative Portfolio |
ING Strategic Allocation Growth Portfolio |
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ING VARIABLE FUNDS |
ING Growth and Income Portfolio |
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ING VARIABLE INSURANCE TRUST |
ING GET U.S. Core Portfolio Series 13 |
ING GET U.S. Core Portfolio Series 14 |
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ING VARIABLE PORTFOLIOS, INC. |
ING Australia Index Portfolio |
ING Emerging Markets Index Portfolio |
ING Euro STOXX 50 ® Index Portfolio |
ING FTSE 100 Index ® Portfolio |
ING Global Value Advantage Portfolio |
ING Hang Seng Index Portfolio |
ING Index Plus LargeCap Portfolio |
ING Index Plus MidCap Portfolio |
ING Index Plus SmallCap Portfolio |
ING International Index Portfolio |
ING Japan TOPIX Index ® Portfolio |
ING Russell Large Cap Growth Index Portfolio |
ING Russell TM Large Cap Index Portfolio |
ING Russell Large Cap Value Index Portfolio |
ING Russell Mid Cap Growth Index Portfolio |
ING Russell TM Mid Cap Index Portfolio |
ING Russell TM Small Cap Index Portfolio |
ING Small Company Portfolio |
ING U.S. Bond Index Portfolio |
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ING VARIABLE PRODUCTS TRUST |
ING International Value Portfolio |
ING MidCap Opportunities Portfolio |
ING SmallCap Opportunities Portfolio |
Exhibit 2(k)(1)
AMENDED AND RESTATED ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT which was made as of the 20th day of October, 1992, amended and restated as of February 17, 1995, April 7, 1995, May 2, 1996, April, 7, 1997, February 2, 1999, November 30, 2008, and as further amended and restated on March 7, 2013 by and between ING PRIME RATE TRUST , a Massachusetts Business Trust (hereinafter referred to as the Trust), and ING Funds Services, LLC, a corporation organized and existing under the laws of Delaware (hereinafter called the Administrator).
W I T N E S S E T H :
WHEREAS, the Trust is a closed-end management investment company, registered as such under the Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, the Administrator is engaged in the business of providing management and administrative services, as an independent contractor; and
WHEREAS, the Trust desires to retain the Administrator to furnish management and administrative services to the Trust pursuant to the terms and provisions of this Agreement, and the Administrator is interested in providing said services.
NOW, THEREFORE, in consideration of the covenants and the mutual promises hereinafter set forth, the parties hereto, intending to be legally bound hereby, mutually agree as follows:
1. The Trust hereby employs the Administrator and the Administrator hereby accepts such employment, to render management and administrative services to the Trust, subject to the
supervision and direction of the Trusts Board of Trustees. The Administrator shall furnish to the Trust the services of executive and administrative personnel to supervise the performance of all administrative functions concerning the operation of the Trust, other than the investment management function. The Administrator shall, as part of its duties hereunder (i) monitor the provisions of the loan agreements and any agreements with respect to participations and assignments and be responsible for recordkeeping with respect to senior loans in the Trusts portfolio; (ii) administer the Trusts corporate affairs including preparing and filing all reports required by the Commonwealth of Massachusetts; (iii) furnish the Trust such office space, equipment, and personnel as is needed by the Trust; (iv) furnish clerical and bookkeeping services as are needed by the Trust; (v) prepare and furnish annual and other reports to shareholders, the Securities and Exchange Commission (the SEC), the New York Stock Exchange (the NYSE) and to any appropriate governmental body; (vi) prepare and file any federal, state and local income tax returns as requested by the Trust; (vii) provide shareholder services as are needed by the Trust; (viii) permit its officers and employees to serve without compensation as trustees or officers of the Trust if elected to such positions; and (ix) in general, supervise the performance of all administrative functions of the Trust, subject to the ultimate supervision and direction of the Trusts Board of Trustees.
2. (a) The Administrator shall be responsible for preparing the Trusts registration statements and supplements to the Trusts prospectuses and Statements of Additional
Information (Disclosure Documents), and for filing or arranging for the filing of such Disclosure Documents with the SEC and other federal and state regulatory authorities as may be required by applicable law.
(b) Notwithstanding anything in Section 13(a) or elsewhere in this Agreement, the Administrator shall exercise reasonable care consistent with a fiduciary duty in fulfilling its responsibilities under Section 1 of this Agreement.
(c) In the event of a claim, litigation, liability, or a regulatory action or investigation (collectively, a Disclosure Claim) that arises out of or is based upon the disclosure in a Disclosure Document for the Trust (including, but not limited to, a claim arising from an untrue statement or alleged untrue statement in a registration statement for the Trust or an omission or alleged omission of a material fact required to be stated therein or necessary to make statements made in a registration statement not misleading), the Administrator shall indemnify and hold harmless the Trust and each individual who, during the term of this Agreement, serves or had served as a trustee of the Trust who is not an interested person of the Trust, as such term is defined in the 1940 Act (an Independent Trustee), if such Disclosure Claim arises from the Administrators failure or alleged failure to exercise reasonable care consistent with a fiduciary duty in the preparation or filing of the Trusts Disclosure Documents for the loss, costs, or damages, including amounts paid in settlement with the written consent of
the Administrator, which consent shall not be unreasonably withheld, and including reasonable legal and other expenses, that arise from such Disclosure Claim.
(d) In addition to the indemnification provided in Section 2(c) of this Agreement, the Administrator agrees to indemnify and hold harmless the Independent Trustees for the costs of defense of a Disclosure Claim, including reasonable attorneys fees, regardless of whether such Disclosure Claim arises from the Administrators failure or alleged failure to exercise reasonable care consistent with a fiduciary duty in the preparation of the Trusts Disclosure Documents, subject to the Administrators right to assume the defense of such Disclosure Claim pursuant to Section 2(i) of this Agreement.
(e) The parties expressly acknowledge that this Section 2 confers rights and remedies upon the Trust and each Independent Trustee, including the right to enforce the indemnification provided for in Sections 2(c) and 2(d) of this Agreement. The obligation of the Administrator to provide indemnification to the Trust and the Independent Trustees, as set forth in this Section 2, shall remain in effect after the termination of this Agreement.
(f) The indemnification of the Trust provided for in Section 2(c) of this Agreement shall apply only to the extent that any loss to the Trust is not covered by insurance held by the Trust, and shall not apply if: (i) the disclosure giving rise to the Disclosure Claim was provided by or on behalf of an Independent Trustee for inclusion in the Trusts Disclosure Documents; or (ii) indemnification is not allowed under applicable law.
(g) The indemnification of an Independent Trustee provided in Sections 2(c) and 2(d) of this Agreement shall apply only to the extent that any loss to the Independent Trustee is not covered by insurance held by the Trust or the Independent Trustees, and shall not apply if: (i) losses are actually indemnified by the Trust, consistent with the Trusts organizational documents; (ii) the disclosure giving rise to the Disclosure Claim was provided by or on behalf of an Independent Trustee for inclusion in the Trusts Disclosure Documents; (iii) losses are the result of willful misfeasance, bad faith, gross negligence or reckless disregard on the part of an Independent Trustee; or (iv) indemnification is not allowed under applicable law.
(h) The Administrator shall not be liable for indemnification of an Independent Trustee under this Section 2 unless the Independent Trustee has notified the Administrator in writing within a reasonable time after the summons or other first legal process giving information of the nature of the Disclosure Claim is served upon such Independent Trustee (or after such Independent Trustee shall have received notice of such service on any designated agent); provided, however, that notification of the Administrator is not required if the Administrator had actual knowledge about the nature of the Disclosure Claim. In the event of a request for indemnification from an Independent Trustee, the Administrator shall pay advances to the fullest extent permissible under the 1940 Act and applicable state law.
(i) In the event of a request for indemnification from the Trust or an Independent Trustee (Indemnified Party), the Administrator shall be entitled, upon notice to the
Indemnified Party, to assume the defense of any Disclosure Claim against the Indemnified Party, with counsel satisfactory to the Administrator and the Indemnified Party.
3. The Administrator shall, for all purposes herein, be deemed to be an independent contractor, and shall, unless otherwise expressly provided and authorized, have no authority to act for or represent the Trust in any way, or in any way be deemed an agent for the Trust. It is expressly understood and agreed that the services to be rendered by the Administrator to the Trust under the provisions of this Agreement are not to be deemed exclusive, and the Administrator shall be free to render similar or different services to others so long as its ability to render the services provided for in this Agreement shall not be impaired thereby.
4. The Administrator agrees to use its best judgment and efforts in performing the services to the Trust as contemplated hereunder, and for this purpose the Administrator shall, at its own expense, maintain such staff and employ or retain such personnel and consult with such other persons as it shall from time to time determine to be necessary to the performance of its obligations under this Agreement.
5. In performing the administrative services hereunder, the Administrator shall at all times comply with the applicable provisions of the Investment Company Act of 1940 and any other federal or state securities laws.
6. All services to be provided by the Administrator under this Agreement may be furnished by any directors, officers or employees of the Administrator or the Administrator may
retain the services of any other entity to provide certain administrative duties under the Administrators supervision.
7. The Administrator shall bear and pay the costs of rendering the services to be performed by it under this Agreement. Without limiting the generality of the foregoing, the Administrator shall bear the following expenses: the salaries and expenses of all personnel of the Trust and the Administrator, except for the fees and expenses of Independent Trustees not affiliated with the Trust or the Administrator; costs to prepare information for determination of net asset value by the Trusts recordkeeping and accounting agent; expenses to maintain the Trusts books and records that are not maintained by the Trusts Manager, Custodian or Transfer Agent; costs incurred to assist in the preparation of financial information for the Trusts income tax returns, proxy statements, quarterly and annual shareholder reports; expenses to provide shareholder services in connection with the Trusts dividend reinvestment and cash purchase plans; expenses to provide shareholder services in preparation of tender offers, if any, or to shareholders proposing to transfer their shares to a third party; and all expenses incurred by the Administrator or by the Trust in rendering the administrative services pursuant to the terms of this Agreement.
8. The Trust shall bear and pay for all other expenses of its operation, except for those expenses expressly assumed by the Manager to the Trust pursuant to an Investment Management Agreement between the Manager and the Trust, including, but not limited to, the
fees payable to the Manager; the fees and expenses of Independent Trustees who are not affiliated with the Manager or the Administrator; the fees and certain expenses of the Trusts Custodian and Transfer Agent, including the cost of providing records to the Administrator in connection with its obligation of maintaining required records of the Trust; the charges and expenses of the Trusts legal counsel and independent accountants; direct costs of ING Counsel and its support staff and for legal services related to registration statements, proxy materials and periodic reports to shareholders, contracts with third parties, examinations and inquiries by regulatory entities, compliance with requirements of the 1940 Act, and meetings of the Board of Trustees; commissions and any issue or transfer taxes chargeable to the Trust in connection with its transactions; all taxes and corporate fees payable by the Trust to governmental agencies; the fees of any trade association of which the Trust is a member; the cost of share certificates representing shares of the Trust; organizational and offering expenses of the Trust and the fees and expenses involved in registering and maintaining registration of the Trust and of its shares with the SEC and NYSE and qualifying its shares under applicable state securities laws including the preparation and printing of the Trusts registration statements and prospectuses for such purposes; allocable communications expenses, with respect to investor services and all expenses of stockholders and Trustees meetings; of preparing, printing and mailing reports, proxy statements and prospectuses to stockholders; the cost of insurance; fees and expenses of counsel to the Independent Trustees of the Trust and any consultants or other persons engaged by or on
behalf of the Independent Trustees; and litigation and indemnification expenses and extraordinary expenses not incurred in the ordinary course of the Trusts business.
9. To the extent the Administrator incurs any costs or performs any services which are an obligation of the Trust, as set forth herein, the Trust shall promptly reimburse the Administrator for such costs and expenses. To the extent the services for which the Trust is obligated to pay are performed by the Administrator, the Administrator shall be entitled to recover from the Trust only to the extent of its costs for such services.
10. (a) The Trust agrees to pay to the Administrator, and the Administrator agrees to accept, as full compensation for all administrative services furnished or provided to the Trust and as full reimbursement for all expenses assumed by the Administrator, an administration fee computed at the annual rate of 0.25% of the managed assets of the Trust. For purposes of this Agreement, Managed Assets shall mean the average daily gross asset value of the Trust, minus the sum of the Trusts accrued and unpaid dividends on any outstanding Preferred Shares and accrued liabilities (other than liabilities for principal amount of any borrowings incurred, commercial paper or notes issued by the Trust and liquidation preference of any outstanding Preferred Shares.)
(b) The administration fee shall be accrued daily by the Trust and paid to the Administrator at the end of each calendar month.
11. The Administrator agrees that neither it nor any of its officers or employees shall take any short position in the capital stock of the Trust. This prohibition shall not prevent the purchase of such shares by any of the officers and directors or bona fide employees of the Administrator or any trust, pension, profit-sharing or other benefit plan for such persons or affiliates thereof.
12. Nothing herein contained shall be deemed to require the Trust to take any action contrary to its Trust Indenture or any applicable statute or regulation, or to relieve or deprive the Board of Trustees of the Trust of its responsibility for and control of the conduct of the affairs of the Trust.
13. (a) In the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of obligations or duties hereunder on the part of the Administrator, the Administrator shall not be subject to liability to the Trust or to any shareholder of the Trust for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security by the Trust.
(b) The foregoing Section 13(a) shall not apply to a claim for indemnification under Section 3 of this Agreement.
(c) Notwithstanding the foregoing Section 13(a), the Administrator agrees to reimburse the Trust for any and all costs, expenses, and counsel and Trustees fees reasonably incurred by the Trust in the preparation, printing and distribution of amendments to its
registration statement, holding of meetings of its shareholders or Trustees, the conduct of factual investigations, any legal or administrative proceedings including any applications for exemptions or determinations by the SEC which the Trust incurs as the result of action or inaction of the Administrator or any of its shareholders where the action or inaction necessitating such expenditures (i) is directly or indirectly related to any transactions or proposed transaction in the shares or control of the Administrator or its affiliates (or litigation relates to any pending or proposed future transaction in such shares or control) which shall have been undertaken without the prior, express approval of the Trusts Board of Trustees; or (ii) is within the sole control of the Administrator or any of its affiliates or any of their officers, directors, employees or shareholders. The Administrator shall not be obligated pursuant to the provisions of this Subparagraph 13(c), to reimburse the Trust for any expenditures related to the institution of an administrative proceeding or civil litigation by the Trust or a Trust shareholder seeking to recover all or a portion of the proceeds derived by any shareholder of the Administrator or any of its affiliates from the sale of his shares of the Administrator, or similar matters. So long as this Agreement is in effect, the Administrator shall pay to the Trust the amount due for expenses subject to this Subparagraph 13(c) within thirty (30) days after a bill or statement has been received by the Trust therefor. This provision shall not be deemed to be a waiver of any claim the Trust may have or may assert against the Administrator or others or costs, expenses, or
damages heretofore incurred by the Trust for costs, expenses, or damages by the Trust may hereafter incur which are not reimbursable to it hereunder.
(d) No provision of this Agreement shall be construed to protect any Trustee or officer of the Trust, or the Administrator, from liability in violation of Section 17(h) and (i) of the 1940 Act.
14. (a) This Agreement shall become effective at the close of business on the date hereof and shall continue in effect from year to year thereafter so long as such continuation is specifically approved at least annually by (i) the Board of Trustees of the Trust, and (ii) the vote of a majority of the Independent Trustees of the Trust, cast in person at a meeting called for the purpose of voting on such approval.
(b) This Agreement may be terminated at any time, without penalty, by the Trust by giving 60 days written notice of such termination to the Administrator at its principal place of business, or may be terminated at any time by the Administrator by giving 60 days written notice of such termination to the Trust at its principal place of business.
15. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule, or otherwise, the remainder of this Agreement shall not be affected thereby.
16. This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties. This Agreement shall extend to and shall be binding
upon the parties thereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by the Administrator without the written consent of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate by their respective officers on the day and year first above written.
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ING PRIME RATE TRUST |
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/s/ Kimberly A. Anderson |
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Kimberly A. Anderson |
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Senior Vice President |
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ING FUNDS SERVICES, LLC |
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/s/ Todd Modic |
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Todd Modic |
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Senior Vice President |
Exhibit 2(k)(7)
EXPENSE LIMITATION AGREEMENT
ING PRIME RATE TRUST
This EXPENSE LIMITATION AGREEMENT (the Agreement) is effective May 7, 2013, by and between ING Investments, LLC (the Investment Manager) and ING Prime Rate Trust (the Registrant). The Registrant is not a series fund investment company, therefore this Agreement shall apply to the Registrant, and the use of the terms Fund or Funds herein shall refer to the Registrant.
WHEREAS, the Registrant is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a closed-end management investment company; and
WHEREAS , the Registrant and the Investment Manager desire that the provisions of this Agreement do not adversely affect a Funds status as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code), do not interfere with a Funds ability to compute its taxable income under Code Section 852, do not adversely affect the status of the distributions a Fund makes as deductible dividends under Code Section 562, and do comply with the requirements of Revenue Procedure 99-40 (or any successor pronouncement of the Internal Revenue Service); and
WHEREAS, the Registrant and the Investment Manager have entered into an investment management agreement (the Management Agreement), pursuant to which the Investment Manager provides investment advisory services to each Fund; and
WHEREAS, the Registrant and the Investment Manager have determined that it is appropriate and in the best interests of the Funds and their shareholders to maintain the expenses of each Fund at a level below the level to which each such Fund might otherwise be subject.
NOW, THEREFORE, the parties hereto agree as follows:
1. Expense Limitation .
1.1 Applicable Expense Limit . To the extent that the ordinary operating expenses, including but not limited to investment advisory fees payable to the Investment Manager, but excluding interest, taxes, investor relations services, other investment-related costs, leverage expenses (as defined below), extraordinary expenses such as litigation, other expenses not incurred in the ordinary course of such Funds business, and expenses of any counsel or other persons or services retained by such Funds Trustees who are not interested persons, as that term is defined in the 1940 Act, of the Investment Manager (the Fund Operating Expenses), incurred by each Fund listed on Schedule A during any term of this Agreement (the Term) exceed the Operating Expense Limit, as defined in Section 1.2 below, for such Fund for such Term, such excess amount (the Excess Amount) shall be the liability of the Investment Manager. For the purposes of this Agreement, leverage expenses shall mean fees, costs and expenses incurred by a Funds use of leverage (including, without limitation, expenses incurred
by a Fund in creating, establishing and maintaining leverage through borrowings or the issuance of preferred shares).
1.2 Operating Expense Limit . The Operating Expense Limit in any Term with respect to each Fund shall be the amount specified in Schedule A .
1.3 Daily Computation . The Investment Manager shall determine on each business day whether the aggregate Term to date Fund Operating Expenses for any Fund exceed the Operating Expense Limit, as such Operating Expense Limit has been pro-rated to the date of such determination (the Pro-Rated Expense Cap). If, on any business day, the aggregate Term to date Fund Operating Expenses for any Fund do not equal the Pro-Rated Expense Cap for that Fund, the amount of such difference shall be netted against the previous days accrued amount for Excess Amounts or Recoupment Amounts (as defined below), and the difference shall be accrued for that day as an Excess Amount or Recoupment Amount as applicable.
1.4 Payment . At the end of each month, the accruals made pursuant to Section 1.3 above shall be netted, and the result shall be remitted by the Investment Manager to the Fund if such netting results in an Excess Amount, and it shall be remitted to the Investment Manager if such netting results in a Recoupment Amount and the Investment Manager is entitled to a Recoupment Amount pursuant to Section 2 below. Any such amounts remitted to a Fund, or repaid by a Fund, shall be allocated to a Fund in accordance with the terms of the 1940 Act. The Registrant may offset amounts owed to a Fund pursuant to this Agreement against the Funds advisory fee payable to the Investment Manager.
2. Right to Recoupment . If the Investment Manager has waived or reduced any investment advisory fees, or made any payments pursuant to Section 1.4 above, relating to any of the 36 months immediately preceding any month end calculation pursuant to Section 1.4 above, the Investment Manager shall be entitled to recoup from a Fund any such investment advisory fees waived or reduced and any such payments made (collectively, a Recoupment Amount), if (i) on the date of any calculation under Section 1.3, the aggregate Term to date Fund Operating Expenses for any Fund are less than that days Pro-Rated Expense Cap for that Fund, and (ii) such Recoupment Amounts have not already been recouped. Any amounts recouped from a Fund shall be recouped in accordance with the 1940 Act. Amounts recouped shall be allocated to the oldest Recoupment Amounts during such 36-month period until fully recouped, and thereafter to the next oldest Recoupment Amounts, and so forth.
3. Term and Termination . This Agreement shall have an initial term with respect to each Fund ending on the date indicated on Schedule A , as such schedule may be amended from time to time. Thereafter, this Agreement shall automatically renew for one-year terms with respect to a Fund unless the Investment Manager provides written notice of the termination of this Agreement to a lead Independent Director of the Registrant within 90 days of the end of the then current term for that Fund and such termination is approved by the Board of Directors of the Registrant. In addition, this Agreement shall terminate with respect to a Fund upon termination of the Management Agreement with respect to such Fund, or it may be terminated by the Registrant, without payment of any penalty, upon written notice to the Investment Manager at its principal place of business within 90 days of the end of the then current term for a Fund.
4. Miscellaneous .
4.1 Captions . The captions in this Agreement are included for convenience of reference only and in no other way define or delineate any of the provisions hereof or otherwise affect their construction or effect.
4.2 Interpretation . Nothing herein shall be deemed to require the Registrant or a Fund to take any action contrary to the Registrants articles of incorporation, declaration of trust, or similar governing document, an applicable prospectus or statement of additional information, or any applicable statutory or regulatory requirement, or to relieve or deprive the Registrants Board of Trustees of its responsibility for and control of the conduct of the affairs of the Registrant or the Funds.
4.3 Definitions . Any question of interpretation of any term or provision of this Agreement, including but not limited to the investment management fee, the computations of net asset values, and the allocation of expenses, having a counterpart in or otherwise derived from the terms and provisions of the Management Agreement or the 1940 Act, shall have the same meaning as and be resolved by reference to such Management Agreement or the 1940 Act.
4.4 Amendments . This Agreement, including the applicable expense limits for a Fund as set forth on Schedule A, may be amended only by a written agreement signed by each of the parties hereto and such amendment is approved by the Board of Directors of the Registrant.
IN WITNESS WHEREOF , the parties have caused this Agreement to be signed by their respective officers thereunto duly authorized, as of the day and year first above written.
ING PRIME RATE TRUST |
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ING INVESTMENTS, LLC |
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By: |
/s/ Kimberly A. Anderson |
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By: |
/s/ Todd Modic |
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Kimberly A. Anderson |
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Todd Modic |
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Senior Vice President |
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Senior Vice President |
SCHEDULE A
to the
EXPENSE LIMITATION AGREEMENT
ING PRIME RATE TRUST
OPERATING EXPENSE LIMITS
Name of Fund* |
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Maximum Operating Expense Limit
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ING Prime Rate Trust Initial Term Expires July 1, 2014 |
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1.05% of average daily Managed Assets(1) plus 0.15% of average daily net assets |
/s/ H.E.
HE
Effective Date: May 7, 2013 to reflect new agreement as a result of receiving shareholder approval as a result of IPO.
* This Agreement shall automatically renew for one-year terms with respect to a Fund unless otherwise terminated in accordance with the Agreement.
(1) Managed Assets are defined as the Funds average daily gross asset value, minus the sum of the Funds accrued and unpaid dividends on any outstanding preferred shares and accrued liabilities (other than liabilities for the principal amount of any borrowings incurred, commercial paper or notes issued by the Fund and the liquidation preference of any outstanding preferred shares).
Exhibit 2(n)(1)
[DECHERT LLP LETTERHEAD]
June 24, 2014
Voya Prime Rate Trust
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
Re: Voya Prime Rate Trust
SEC File Nos. 333-180973, 811-05410
Dear Ladies and Gentleman:
We hereby consent to all references to our firm in Post-Effective Amendment No. 4 to the Registration Statement of Voya Prime Rate Trust (formerly, ING Prime Rate Trust). In giving such consent, however, we do not admit that we are within the category of persons whose consent is required by Section 7 of the Securities Act of 1933, as amended, and the rules and regulations thereunder.
Very truly yours,
/s/ Dechert LLP
Exhibit 2(n)(2)
Consent of Independent Registered Public Accounting Firm
The Board of Trustees
Voya Prime Rate Trust
We consent to the use of our report dated April 24, 2014, incorporated herein by reference, to Voya Prime Rate Trust (formerly, ING Prime Rate Trust), and to the references to our firm under the headings Financial Highlights and Independent Registered Public Accounting Firm in the Prospectus and Independent Registered Public Accounting Firm in the Statement of Additional Information.
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June 24, 2014 |
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Exhibit 2(r)(1)
Amended May 2014
Code of Ethics
of
Voya Investment Management LLC
Voya Investments, LL
C
Voya Investment Management Co
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LLC
Directed Services LL
C
Voya Investment Management (UK) Limited
Voya Alternative Asset Management LL
C
Pomona Management, LL
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Voya Investments Distributor, LLC
Voya Realty Group, LLC
Voya Investment Trust Co
.
Voya Funds
A. Adoption of Code of Ethics
This Code of Ethics ( the Code) has been adopted by each of the registered investment companies advised by Voya Investments LLC (or an affiliate) and operating under the Voya Funds umbrella (the Voya Funds) and by each of the following Voya entities (collectively, referred to as Voya Entities):
Voya Investment Management LLC
Voya Investments, LLC
Voya Investment Management Co. LLC
Directed Services LLC
Voya Alternative Asset Management LLC
Pomona Management, LLC
Voya Investments Distributor, LLC
Voya Realty Group, LLC
Voya Investment Trust Co.
Voya Investment Management (UK) Limited
The provisions of the Code are applicable to all directors, trustees, officers and persons employed or appointed by one or more of the Voya Entities as well as their immediate family members living in such designated persons household (collectively, referred to as Employees) unless otherwise noted.
In addition, the Code is applicable to the trustees/directors of each of the Voya Funds (the Voya Funds Directors). In the event one or more Voya Funds Directors are deemed to be an Interested Person (as that term is defined under the Investment Company Act of 1940 (IC Act) of a Voya Fund), such Interested Person shall be considered an Employee for purposes of the personal trading requirements included in this Code.
All Employees and Voya Funds Directors (collectively, referred to as Covered Persons) will be provided with a copy of this Code upon employment with the Voya Entities or appointment and notified when any material amendments are made to the Code.
The Code is not intended to supersede or otherwise replace the Voya Code of Conduct. All of the policies and guidelines contained in the Voya Code of Conduct shall remain in full force and effect as to Employees.
B. Statement of Fiduciary Standards
A fiduciary is a person or organization that manages money or property for another, usually a client, and, as a result, has a legal duty to act in the best interests of that client. This Code is based on the overriding principle that the Employees have a fiduciary duty to firm clients, including the Voya Funds, while the Voya Funds Directors have a fiduciary duty only to the Voya Funds. Accordingly, Covered Persons shall conduct their activities in accordance with the following standards:
1 Clients Interests Come First . In the course of fulfilling their duties and responsibilities, Covered Persons must at all times place the interests of the clients (or, in the case of the Voya Funds Directors, the Voya Funds) first. In particular, Covered Persons shall avoid putting their own personal interests ahead of the interests of a client.
2 Conflicts of Interest Shall Be Avoided. Covered Persons must avoid any situations involving an actual or potential conflict of interest or possible impropriety with respect to their duties and responsibilities to, in the case of an Employee, a Voya Entity or a client of a Voya Entity, or in the case of a Voya Fund Director, the Voya Funds.
3 Compromising Situations Shall Be Avoided. Covered Persons shall never take advantage of their position of trust and responsibility. Covered Persons must avoid any situation that might compromise or call into question their exercise of full independent judgment in the best interests of clients.
All activities of Covered Persons shall be guided by, and adhere to, these fiduciary standards. The remainder of this Code sets forth specific rules and procedures that are consistent with these fiduciary standards. However, all activities by Employees are required to conform to these standards regardless of whether the activity is specifically covered in this Code. Any violation of the Code by an Employee may result in penalties that could include reprimand, suspension, fines, and termination of employment with one or more Voya Entities.
C. Duty of Confidentiality
Covered Persons must keep confidential any non-public information regarding Voya, a Voya Fund, any client or any entity whose securities they know or should know are under investment review by a portfolio management team acting on behalf of a Voya Entity. Covered Persons have the highest fiduciary obligation not to reveal confidential information of any nature to any party that does not have an explicitly clear and compelling need to know such information.
D. Covered Persons Duty to Comply with Federal Securities Laws
Voya Entities activities are governed by the federal securities laws, including the Investment Advisers Act of 1940 and the IC Act. Covered Persons are expected to adhere to the federal securities laws, whether or not the activity is specifically covered in this Code.
E. Prohibitions on Insider Trading
1 Trading on Knowledge of Clients Activities. Covered Persons are prohibited from taking advantage of their knowledge of recent or impending research generated by the firm or securities activities of clients. In particular, Covered Persons are prohibited from trading (purchasing, selling or disposing in any manner, including by gift, directly or indirectly) any security when they have actual knowledge that the security is being purchased or sold, or considered for purchase or sale, on behalf of a client account. This prohibition applies to all securities in which a Covered Person has acquired, or will acquire, beneficial ownership. For these purposes, a Covered Person is considered to have beneficial ownership in all securities over which the Covered Person enjoys economic benefits substantially equivalent to ownership (for example, securities held in trust for the persons benefit), regardless of who is the registered
owner.
2 Trading on Knowledge of Material Non-Public Information. All Covered Persons are prohibited from taking personal advantage of their knowledge of material non-public information, particularly buying or selling any security while in the possession of material non-public information about the issuer of the security. The Code also prohibits Covered Persons from communicating to outside parties any material non-public information about any security or the company that issues the security.
(a) Identifying Material Non-Public Information.
Material Information. Information is material when there is a substantial likelihood that a reasonable investor would consider it important when making investment decisions. Generally, this is information that, if disclosed, would have an effect on the price of a companys securities.
Material information often relates to a companys results and operations, including dividend changes, earnings results, changes in previously released estimates, merger or acquisition proposals, major litigation, liquidity problems and management developments. Material information may also relate to the market for a companys securities. Information about a significant order to purchase or sell securities may also be deemed material.
Unfortunately, there is no simple test to determine when information is material. You are encouraged to direct any questions to the Voya IM Compliance Department.
Non-Public Information. Information is considered public when it has been circulated broadly to investors in the marketplace. Tangible evidence of such circulation is the best indication that the information is public. For example, information can be considered public when it has been made available through a public filing with a regulatory body, or through a mainstream media source such as The Wall Street Journal.
(b) Reporting Material Non-Public Information . Before executing any trade for yourself or a client, you must determine whether you have knowledge of any material non-public information. If you think you might have such knowledge, you must:
· Report the information and proposed trade immediately to the Voya IM Compliance Department;
· Refrain from trading in the security on behalf of yourself or clients; and
· Refrain from communicating the information to anyone outside or inside of the Voya Entities other than the Voya IM Compliance Department.
The Voya IM Compliance Department, in consultation with Legal, will determine whether the information is material and non-public and, if so, what actions need to be taken.
3. Disciplinary Sanctions. Trading securities while in the possession of material non-public information, or improperly communicating that information, may expose you and the Voya Entities to stringent penalties, including fines, suspensions and imprisonment. Regardless of whether a government inquiry occurs, the Voya Entities view seriously any violations of this Code.
F. Additional Personal Trading Restrictions
The restrictions of this section apply to all Employees and to accounts over which they have the authority to make investment decisions, for all transactions involving securities.
1. Pre-Clearance of Securities Transactions. Except for the transactions listed below, approval must be obtained from the Voya IM Compliance Department before entering an order to buy or sell or transfer securities by gift. An approval to trade is only valid on the day it is received (note: such approvals terminate at 4 p.m. Eastern Time on the date such approval is granted) . If you receive an approval and do not complete the trade that same day, you must seek pre-clearance to complete the trade the next (or any subsequent) day. Except as noted below, an approval must be received for every transaction.
The Voya Entities utilize a vendor system to process personal trading. All preclearance requests shall be made via the system, which can be accessed at: https://iim.ptaconnect.com/pta/pages/index.jsp
Employees assigned portfolio management or trading responsibility are prohibited from knowingly buying or selling the same security traded in an associated client account for a period of 15 days (7 days prior to the client trade and 7 days after the client trade).
2. Exceptions to Pre-Clearance of Securities Transactions.
· Direct obligations of the Government of the United States;
· High quality short-term debt instruments, including bankers acceptances, bank certificates of deposit, commercial paper, money market securities and repurchase agreements;
· Shares of open-end funds, including Voya Fund Shares, which includes those in Voyas 401(k) plan (as defined in Section G, below);
· Transactions in accounts over which an Employee has no direct or indirect control or influence (managed or discretionary accounts);
· Transactions under any incentive compensation plan sponsored by the Voya Entities or its affiliates;
· Transactions made through an automatic payroll deduction or similar program (excluding Self Directed Brokerage Accounts) where the timing of purchases and sales is controlled by someone other than the Employee;
· Transactions which are part of an automatic dividend reinvestment or similar plan where the timing of purchases and sales is controlled by someone other than the Employee;
· An exercise of pro-rata rights issued by a company to all the holders of a class of its securities;
· On any given day, transactions involving 100 shares or less (per account) of common stock issued by companies included in the S&P 500 Index; and
· On any given day, transactions involving 100 shares or less (per account) of Exchange-Traded Funds.
While the securities transactions noted above may not need to be pre-cleared, they may need to be held and reported in accordance with the reporting requirements set forth in Section H., below.
3. Prohibition on Initial Public Offerings. Employees are prohibited from acquiring securities in initial public offerings; except for transactions made pursuant to an employee incentive compensation, retention or other program put in place by Voya IM, its parent company or Voya affiliates.
4. Restrictions on Private Placements. Employees are prohibited from acquiring non-public securities (a private placement) without the prior approval of the Voya IM Compliance Department. If an Employee is granted permission to make such a personal investment, that Employee will not participate in any consideration of whether clients should invest in the same issuers public or non-public securities. From time to time Employees who are members of the private placement management team may invest in private placement offerings that may also be portfolio candidates for client accounts.
5. Prohibition on Short-Term Trading Profits. Employees are prohibited from profiting from the purchase and sale, or sale and purchase, of the same (or related) securities or exchangetraded funds as well as shares of Voya open-end funds. In the event that he or she realizes profits on such short-term trades, they may be required to disgorge the profit.
Holding period requirements are as follows:
· Shares of securities (including, ING Groep N.V. or Voya, ING Group Company Stock Fund, Voya Company Stock Fund, individual stocks, bonds, closed-end funds, derivatives, etc.) must be held for 60 calendar days from the purchase date.
· Shares of exchange-traded funds must be held for 30 calendar days from the purchase date.
· Shares of Voya open-end funds (including 401 k transactions) must be held for 30 calendar days from the purchase date. Note: The 30 day
holding period for shares of Voya open-end mutual funds is measured from the time of the most recent purchase of the shares of the relevant Voya Fund.
6. Prohibition of Short Selling ING or Voya Securities. Employees are prohibited from shorting any securities issued by ING Groep N.V. or Voya. (ING or Voya Securities), either directly or indirectly, including the use of derivatives transactions. For avoidance of doubt, this prohibition includes writing a covered call option against ING or Voya Securities.
7. Prohibition of Trading in ING or Voya Securities during the Closed Period. Employees are prohibited from trading ING or Voya Securities, including the ING Group Company Stock Fund, Voya Company Stock Fund and the ING Leveraged Company Stock Fund in Voyas 401k Plan, during the Closed Period for ING or Voyas Financial Instruments as set forth by ING Groep N.V. or Voya. The Closed Periods are set forth on the vendor system utilized to process personal trading requests, which can be accessed at: https://iim.ptaconnect.com/pta/pages/index.jsp
G. Transactions in Voya Fund Shares
The following restrictions and requirements apply to all purchases and sales of shares of open-end funds issued by Voya Funds other than money market and short-term bond funds (Voya Fund Shares) and all holdings of Voya Fund Shares by Covered Persons, including those in which they have a beneficial ownership interest, except as provided below.
These restrictions and requirements do not apply to purchases of Voya Fund Shares through (1) an automatic dividend reinvestment plan; or (2) through any other automatic investment plan, automatic payroll deduction plan, or other automatic plan approved by the Voya IM Compliance Department.
Compliance with Prospectus.
All transactions in Voya Fund Shares must be in accordance with the policies and procedures set forth in the Prospectus and Statement of Additional Information for the relevant Fund, including but not limited to the Funds policies and procedures relating to short term trading and forward pricing of securities.
Additional Restrictions
Certain Covered Persons may be considered insiders to a Voya exchange traded closed-end fund. In such cases, these persons will be notified of their status as well as advised of additional restrictions imposed on them and their ability to transact in such Voya exchange traded closed-end fund.
Solely to facilitate compliance with timely Form 4 and 5 filing requirements with the Securities and Exchange Commission, all such insiders must submit a written report of any transaction involving a Voya Fund that is a closed-end investment company on the trade date
of such transaction to the Voya IM Compliance Department.
H. Reporting Requirements
1. Disinterested Directors/Trustees
Voya Funds Directors who are not deemed to be interested persons (as that term is defined under the IC Act) of a Voya Fund, its investment adviser or the advisers affiliate (the Disinterested Directors) must submit a quarterly report containing the information set forth in paragraph 2, below, only with respect to those transactions for which such person knew or, in the ordinary course of fulfilling his or her official duties as a Disinterested Director, should have known, that during the 15-day period immediately before or after the Disinterested Directors transaction in securities that are otherwise subject to the reporting requirements described herein, an applicable Voya Fund had purchased or sold the security at issue or that an investment adviser or sub-adviser for an applicable Voya Fund had considered purchasing or selling such security.
2. Employees (including Interested Directors)
Personal Securities Holdings and Transactions. The requirements of this section apply to all Employees for all holdings and transactions involving securities in which the Employee acquired, or will acquire, beneficial ownership (economic benefits equivalent to ownership, such as securities held in trust for the Employees benefit, regardless of who is the registered owner) .
However, these reporting requirements do not apply to holdings or transactions involving the following excluded securities:
· direct obligations of the Government of the United States;
· high quality short-term debt instruments, including bankers acceptances, bank certificates of deposit, commercial paper, money market securities and repurchase agreements; and
· shares of open-end mutual funds that are not managed by the Voya Entities or their affiliates.
a. Initial Disclosure of Personal Holdings. Employees are required to disclose all their personal securities holdings to the Voya IM Compliance Department within 10 days of commencing employment with a Voya Entity or appointment with a Voya Fund.
b. Securities Transaction Records. Employees should be aware that the Voya Entities maintain a list of designated broker-dealers with whom Employees may maintain a brokerage account. Employees shall notify the Voya IM Compliance Department if they intend to open, or have opened, a brokerage account. If requested, Employees shall direct their brokers to supply Compliance with duplicate confirmation statements of their securities transactions and copies of all periodic statements for their accounts.
c. Quarterly Account and Transaction Reports. Employees are required to submit a
report listing their securities transactions made during the previous quarter within 30 days of the end of each calendar quarter and of the end of each calendar quarter.
d. Annual Holdings Report. Employees are required to submit a report listing all securities held as of December 31 of the year reported within 30 days of the end of the calendar year.
e. Information to be Reported . Employees are required to provide the following information when submitting reports as required by a. through d., above:
i. Initial and Annual Holdings Reports must include the :
· title or description and type of security, the exchange ticker symbol or CUSIP number, the number of shares or principal amount of each security;
· broker-dealer or bank where accounts are held; and
· date the report is submitted.
ii. Quarterly Transaction Reports must include the :
· title or description and type of security, the exchange ticker symbol or CUSIP number, the number of shares and principal amount of each security (as well as the interest rate and maturity date, if applicable);
· trade date and type of transaction (i.e. buy, sell, open, close, etc.);
· price of the security;
· broker-dealer or bank account through which the transaction was effected; and
· date the report is submitted.
f. All reports, other than the Initial Disclosure of Personal Holdings, shall be made via the vendor system, which can be accessed at: https://iim.ptaconnect.com/pta/pages/index.jsp
3. Employees (excluding Interested Directors)
Receipt of Gifts. No Employee may receive any gift or other favor from any one person or entity doing business with the Voya Entities in contravention of the Voya IM Gift & Entertainment Policy. Employees who receive a gift from any person or entity that raises potential issues under the Voya IM Gift & Entertainment Policy must immediately contact the Voya IM Compliance Department to determine the proper handling of such gift. Employees should refer to the Voya IM Gift & Entertainment Policy.
Outside Activities. Employees are expected to devote their full business day to the business of the Voya Entities. In addition, no one may make use their position as an Employee, make use of information acquired during employment, or make personal investments in a manner that may create a conflict, or the appearance of a conflict, between the Employees personal interests and the interests of the Voya Entities or their clients. All Outside Activities requests shall be
submitted via the vendor system the Voya Entities utilize, which can be accessed at https://iim.ptaconnect.com/pta/pages/index.jsp.
To assist in ensuring that such conflicts are avoided, an Employee must obtain the written approval of the Employees supervising manager and the Voya IM Compliance Department prior to an Employee personally:
· Serving as a director, officer, general partner or trustee of, or as a consultant to, any business, corporation or partnership, including family-owned businesses and charitable, non-profit and political organizations;
· Forming or participating in any stockholders or creditors committee (other than on behalf of Voya Entities) that purports to represent security holders or claimants in connection with a bankruptcy or distressed situation or in making demands for changes in the management or policies of any company, or becoming actively involved in a proxy contest; or
· Making any monetary investment in any non-publicly traded business, corporation or partnership, including passive investments in private companies.
· In addition, every Employee of the Voya Entities must obtain the written approval of their supervisor and the Voya IM Compliance Department prior to:
· Receiving compensation of any nature, directly or indirectly, from any person, firm, corporation, estate, trust or association, other than the Voya Entities, whether as a fee, commission, bonus or other consideration such as stock, options or warrants;
· Accepting a second job of any kind or engaging in any other business outside of the Voya Entities; or
· Participating as a plaintiff, defendant or witness in any non-family related litigation or arbitration.
Every Employee is also required to disclose to the Voya IM Compliance Department if any of their immediate family members (their spouse or any of their parents, siblings or children) hold positions as directors or executive officers of any public company. Limitations may be placed on an Employees investment activities in the event an Employees immediate family member holds such a position.
Similarly, every Employee is required to maintain the data reported in connection with an outside activity and notify the Voya IM Compliance Department in the event of any change to the employees outside activity after initial approval.
4. Covered Persons
Certification of Compliance. All Covered Persons are required to certify to the Voya IM Compliance Department annually, or whenever this Code is materially amended, that they have:
· read and understand the provisions contained in the Code;
· complied with all the requirements of the Code; and
· reported all transactional information required by the Code.
I. The Voya Entities Duty of Confidentiality
All information submitted by a Covered Person to the Voya IM Compliance Department pursuant to this Code will be treated as confidential information. It may, however, be made available to senior management, governmental and securities industry agencies with regulatory authority over the Voya Entities, as well as to Voya Funds Directors, and each of their auditors and legal advisors, as appropriate.
J. Violations of the Code
Covered Persons are required to report any known or suspected violations of the Code to the Voya IM Compliance Department immediately. An Employee who violates this Code or fails to report a violation of the Code may be subject to sanctions. For example, if the same security is purchased or sold on the same day by an Employee, the Employee may be required to donate the difference to charity. In addition, any Employee that violates the codes pre-clearance or transaction reporting provisions may also be suspended from further trading for a period.
K. Exceptions to the Code
Exceptions to the Code will only be made under extraordinary circumstances. No exception may be granted for those sections of the Code that are mandated by regulation.
An exception may be made only upon prior request, and no exception will be granted subsequent to a violation of the Code. To be granted an exception to the Code, a written request regarding the nature of the exception must be made and submitted to Voya IMs Compliance Department and approved by a member of Voya IMs Management Committee. Exceptions to the Code shall be reported as applicable to the Chief Compliance Officer of the Voya Funds and the Boards of Directors/Trustees of the Voya Funds.